FOB and CIF are the two most commonly quoted trade terms — and mixing them up can change your costs (and risk exposure) significantly. Here's the difference in plain language.
FOB: Free On Board
Under FOB, the seller's job ends once the goods are loaded onto the vessel at the port of origin. From that point, the buyer takes over: arranging and paying for ocean freight, insurance, and everything after.
Seller pays for: goods, inland transport to port, export customs clearance, loading charges.
Buyer pays for: ocean freight, marine insurance, import duties, destination handling.
CIF: Cost, Insurance and Freight
Under CIF, the seller takes on more — arranging and paying for ocean freight and minimum insurance coverage all the way to the destination port. However, risk still technically transfers to the buyer once goods are loaded on board, even though the seller is paying for the onward journey.
Seller pays for: everything under FOB, plus ocean freight and insurance to destination port.
Buyer pays for: import duties, destination handling, inland transport from port.
Which one should you choose?
- Choose FOB if: you (or your buyer) have a preferred freight forwarder or better shipping rates than what the other party could arrange, and you want more control over logistics.
- Choose CIF if: your buyer wants a simpler, all-in quote and doesn't want to arrange freight/insurance themselves — common with first-time or smaller buyers.
A quick pricing example
If your FOB value is $8,000 and ocean freight costs $900:
- CFR (Cost and Freight, no insurance) = $8,000 + $900 = $8,900
- CIF (adding ~1.1% insurance on that CFR value) = $8,900 + $97.90 ≈ $8,997.90
Small differences in these terms can matter a lot when you're quoting multiple buyers or comparing offers — always check which term a quotation is based on before comparing prices.