This document explains the difference between FOB and CIF delivery terms in terms of risk and cost sharing through a comparative table. It also offers practical suggestions on which delivery term should be preferred in different situations.
FOB (Free on Board) and CIF (Cost, Insurance and Freight) are two Incoterms delivery terms in international trade that determine the seller's responsibility up to a certain point and the buyer's responsibility from that point onwards. In FOB, the seller's responsibility ends when the goods are loaded onto the ship; in CIF, the seller delivers the goods to the destination port, also bearing the transportation and insurance costs.
In FOB delivery, the seller is responsible for all costs and risks until the goods are loaded onto the ship at the designated loading port. From the moment the goods are loaded onto the ship, the risk and cost pass to the buyer. Therefore, FOB prices do not include sea freight and insurance costs.
In CIF (Customs Import Facility) terms, the seller undertakes to transport the goods to the destination port for a price that includes the cost of the goods, sea freight, and insurance. The risk passes to the buyer when the goods are loaded onto the ship at the port of destination, but the seller remains responsible for the transportation and insurance costs.
| Criterion | FOB | CIF |
|---|---|---|
| Transportation cost | Belonging to the buyer | Seller's property (up to destination port) |
| Insurance cost | Belonging to the buyer | Belonging to the seller |
| Risk crossing point | When the goods are loaded onto the ship | When the goods are loaded onto the ship |
| Price range | Product + shipping only. | Product + shipping + insurance |
| Generally preferred | Buyers who want to organize their own sea transport. | Buyers who want to leave the transportation process to the seller. |
In FOB and CIF, is the risk always the same at the point of loading? Yes, in both delivery methods, the risk passes to the buyer the moment the goods are loaded onto the ship; the difference is who is responsible for the transportation and insurance costs.
Which is cheaper, FOB or CIF? They can't be directly compared; CIF price appears higher than FOB price because it includes transportation and insurance, but the buyer doesn't pay for transportation/insurance separately.
Are FOB and CIF still valid under Incoterms 2020? Yes, FOB and CIF are delivery terms included in Incoterms 2020 and used specifically in sea/inland waterway transport.
How is the delivery method to be used determined? It is usually negotiated between the buyer and seller; the decision is made based on which party prefers to manage the logistics process.
This content was prepared by the GoTradeGo team. If you would like support from a foreign trade expert in your export or import process, you can access relevant profiles on gotradego.com .