由 caicai8478 I. Definition of FOB (Free On Board) and CIF (Cost, Insurance and Freight)
FOB (Free on Board at the Port of Shipment)
Seller’s responsibilities: responsible for transporting the goods to the designated port of shipment and loading them on board (risk transfer is based on the ship’s side, Incoterms® 2020 will be changed to “loaded on board”), and completing export customs clearance.
Buyer’s responsibilities: bear all risks, freight, insurance and import customs clearance after the goods are loaded on board.
CIF (Cost, Insurance and Freight)
Seller’s responsibilities: bear the freight and insurance of the goods to the port of destination, complete export customs clearance, but the risk is still transferred to the buyer at the port of shipment (same as FOB).
Buyer’s responsibilities: bear the risks after the goods are loaded on board (although the seller pays freight and insurance), and is responsible for import customs clearance.
- Comparison of key differences
Comparison items FOB CIF
Risk transfer point The risk is transferred to the buyer after loading on the ship at the port of shipment Same as FOB (same risk transfer point)
Freight Buyer is responsible for the main freight Seller is responsible for the main freight
Insurance Buyer is responsible for insurance (optional) Seller must purchase the minimum insurance (such as CIC All Risks)
Control Buyer chooses the freight forwarder/route Seller chooses the freight forwarder/route - Which term is more conducive to importers to control logistics risks?
Conclusion: FOB is more beneficial to importers for the following reasons:
Logistics dominance
Under FOB, importers can specify freight forwarders and shipping companies by themselves to avoid sellers choosing inefficient logistics (such as slow ships, two-leg ship transshipment) to reduce costs, reducing the risk of delays or cargo damage.
Under CIF, the seller controls the transportation and may prioritize cost rather than timeliness/safety.
Insurance flexibility
Under FOB, importers can purchase higher insurance (such as war risk, warehouse-to-warehouse clause), while CIF sellers usually only purchase minimum insurance (such as peace insurance), and some risks of goods in transit may not be covered.
Risk and cost transparency
FOB freight and insurance are paid directly by the buyer, which is convenient for monitoring all aspects of logistics; CIF freight and insurance are implicit in the price of goods, which may lack transparency.
Port of destination operation control
FOB importers can coordinate with the port of destination agent in advance to ensure efficient delivery; if the seller of CIF designates an agent, communication may be delayed.
IV. Notes
Seller’s reputation: If the seller has poor reputation, FOB can reduce its risk of logistics fraud (such as forged bills of lading).
Bargaining power: CIF may be more friendly to importers with tight funds (the seller advances the freight).
Incoterms® version: Incoterms® 2020 must be clearly cited to avoid disputes due to version differences.
Final advice: If the importer seeks logistics control and risk minimization, FOB is the first choice; if the importer is more concerned about simplifying the procurement process and trusts the seller, CIF can be selected, but the insurance coverage and transportation terms details need to be confirmed.