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Import under CIF is.... than import under FOBAmore riskyBsaferCbetterDnot safer or more risky

Question

Import under CIF is.... than import under FOB

A. more risky
B. safer
C. better
D. not safer or more risky

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Solution

The correct answer is A. more risky.

Explanation:

  1. CIF (Cost, Insurance, and Freight) includes the cost of goods, insurance, and shipping costs until the goods reach the buyer's port. This means that the seller retains responsibility for the goods until they arrive.

  2. FOB (Free on Board) means that the seller's responsibility ends once the goods are on the shipping vessel. The buyer assumes risks and responsibilities from that point onward.

Given these definitions, CIF can be considered more risky for the importer because:

  • The seller has more control over the transport, and any issues during transit might complicate claims or resolution of disputes.
  • The insurance included may not cover all risks, and if the goods are lost or damaged after the seller's responsibility ends, the buyer has to confront that risk.

Thus, compared to FOB, where the buyer has more control and understanding of risks from the point of shipment, CIF is viewed as more risky for the importer.

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