The difference between FOB and CIF and how each shifts cost and risk.
FOB and CIF are two of the most common Incoterms in international trade, and the difference decides who pays for — and who is responsible for — the goods once they leave the factory.
FOB (Free On Board)
Under FOB, the supplier delivers the goods onto the vessel at the origin port and the risk transfers to you at that point. You arrange and pay for ocean freight, insurance and destination charges. FOB gives you control over the freight leg and usually the lowest total cost if you have a good forwarder.
CIF (Cost, Insurance and Freight)
Under CIF, the supplier arranges and pays for freight and a basic insurance policy to the destination port. It is simpler, but you lose visibility into the freight markup and the insurance is often minimal coverage.
Which should you use?
- Choose FOB when you have a reliable freight forwarder and want cost control.
- Choose CIF when you are new to importing and want fewer moving parts.
- Either way, compare landed cost — not the quoted term — to decide.
Frequently asked questions
- What is the difference between FOB and CIF?
- Under FOB the buyer arranges and pays for freight and insurance from the origin port; under CIF the seller pays freight and basic insurance to the destination port. FOB gives more control, CIF is simpler.
- Is FOB or CIF cheaper?
- FOB is usually cheaper in total if you have a competitive freight forwarder, because CIF bundles the seller's freight markup into the price. Always compare full landed cost rather than the headline term.
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