Incoterms Rules
FOB vs CIF: what is the difference
Under FOB the buyer books the vessel and pays the sea freight. Under CIF the seller pays the freight to the destination port and buys minimum insurance for the buyer. In both rules the risk passes to the buyer once the goods are on board at the port of shipment.
Side by side
| FOB Free On Board | CIF Cost, Insurance and Freight | |
|---|---|---|
| Transport | Sea and inland waterway | Sea and inland waterway |
| Export clearance | Seller | Seller |
| Import clearance | Buyer | Buyer |
| Main carriage paid by | Buyer | Seller |
| Insurance | Not required | Seller, minimum cover |
| Risk passes to the buyer | When the goods are loaded on board the vessel at the port of shipment | When the goods are loaded on board the vessel at the port of shipment |
Which one to choose
Choose FOB if you are the buyer and can book vessels yourself, or want to control the freight cost and the shipping schedule. Choose CIF if the buyer wants a price delivered to its port and the seller has better access to freight. Under CIF the buyer still carries the risk at sea, so check whether the minimum cover, Institute Cargo Clauses (C), is enough.