Why Tanzania prefer the use of FOB than CIF?

There are multiple reasons why Tanzania might prefer the use of Free on Board (FOB) over Cost, Insurance, and Freight (CIF) when engaging in international trade transactions:

1. Cost Control and Flexibility: FOB places the responsibility and costs associated with freight and insurance on the buyer. This gives Tanzanian importers greater control over the logistics and allows them to choose their preferred carriers, freight rates, and insurance policies, potentially leading to cost savings and flexibility.

2. Reduced Import Duties and Taxes: In some cases, importing goods under FOB terms can result in lower import duties and taxes for Tanzania compared to CIF. Tariffs and duties in Tanzania are often calculated based on the CIF value of imported goods, which includes the cost of goods, insurance, and freight. Since insurance and freight costs are not included in the FOB value, the taxable value of the goods might be lower, resulting in reduced import charges.

3. Minimizing Risks and Liabilities: Under CIF terms, the exporter is responsible for the goods until they are delivered to the port of destination. This means the exporter bears the risks of damage, loss, or theft during transportation. By choosing FOB terms, Tanzanian importers assume these risks and liabilities once the goods are loaded on the ship, giving them more control over ensuring that the goods arrive safely and in good condition.

4. Local Sourcing of Shipping and Insurance Services: Tanzanian importers may prefer FOB terms to leverage local expertise and services for shipping and insurance. By opting for FOB, they have the freedom to work with domestic freight forwarders, shipping companies, and insurance providers, potentially supporting local businesses and reducing reliance on foreign entities.

5. Trade Agreements and Preferential Tariffs: Some trade agreements or preferential tariff arrangements might offer benefits and privileges to importers who use FOB terms. By utilizing FOB, Tanzanian importers can potentially take advantage of these agreements and secure reduced or preferential tariffs, making imports more cost-effective and competitive in the local market.

It's important to note that the choice of trade terms (FOB or CIF) depends on various factors, including the preferences and business strategies of the importer, exporter, and the nature of the goods being traded. Tanzanian importers may evaluate the overall costs, risks, flexibility, and trade-related benefits when deciding which trade term aligns best with their specific import requirements.