Incoterms
FOB vs CIF: Key Differences
Compare FOB and CIF Incoterms — seller duties, risk transfer, insurance, and when to use each for export quotes.
FOB ends seller duty at loading on board; CIF adds main freight and marine insurance paid by the seller to the named port.
Key Differences at a Glance
FOB (Free on Board) and CIF (Cost, Insurance and Freight) are both sea/inland waterway terms, but they allocate carriage and insurance differently.
- FOB: Seller loads goods on board at origin port; buyer pays freight and insurance.
- CIF: Seller pays main carriage and minimum marine insurance to the named destination port; buyer handles import.
Seller vs Buyer Obligations
Under FOB the seller handles export clearance and loading. Under CIF the seller also contracts for ocean freight and insurance (minimum Institute Cargo Clauses C unless agreed otherwise).
Under FOB the buyer nominates the vessel and bears costs from loading onward. Under CIF the buyer still pays import duties, destination handling, and any insurance above the seller's minimum cover.
Risk Transfer and Cost Structure
Risk transfers on board the vessel at the port of shipment under both FOB and CIF — insurance obligation differs, not the risk point for both rules in Incoterms® 2020.
A CIF quote looks higher because it embeds freight and insurance. Compare landed cost, not headline unit price alone.
Which Term to Choose
Choose FOB when the buyer has strong freight rates or existing forwarder relationships. Choose CIF when the seller controls shipping lanes or the buyer prefers a single all-in quote to the port of destination.
Use our FOB and CIF calculators to compare totals before signing.
Examples
Example — Same goods, FOB vs CIF quote
FOB Ningbo USD 50,000 + buyer freight USD 3,200 + insurance USD 400 ≈ USD 53,600 landed at port.
CIF Hamburg USD 54,100 all-in to port — compare before import duties.
Example — Seller prefers CIF
A textile exporter ships regularly to Rotterdam and negotiates annual freight contracts — CIF quotes simplify buyer decision-making.
FAQ
- Is CIF always more expensive than FOB?
- The CIF line price is higher because it includes freight and insurance, but buyer-arranged freight under FOB can exceed seller CIF rates — compare landed totals.
- Who buys insurance under FOB?
- The buyer typically insures from loading onward unless the contract assigns otherwise.
- Can I use FOB and CIF for the same product?
- Yes — quote both when buyers ask; ensure port names and Incoterms® 2020 version are stated.
- Does risk transfer at different points?
- Under Incoterms® 2020, both FOB and CIF pass risk when goods are on board at the port of shipment.
- Which term is better for new exporters?
- FOB is common when buyers control shipping; CIF helps when you manage freight and want a simpler buyer offer.
Conclusion
FOB and CIF differ mainly in who pays freight and insurance, not necessarily where risk passes. Model both with our FOB Calculator and CIF Calculator, then confirm landed cost.