CIF vs FOB Incoterms: Differences and Comparison

Differences between FOB and CIF Incoterms

Cost, Insurance, and Freight (CIF) and Free on Board (FOB) are two Incoterms created by the ICC to standardise international freight shipping. CIF and FOB Incoterms are very popular for shipping sea cargo. Discover the difference between FOB and CIF and determine which is better for your operations.

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What is the difference between FOB and CIF?

CIF and FOB shipping terms are both used for maritime and water cargo. The differences between CIF and FOB shipping terms depend on which type of FOB Incoterm is used, FOB Origin or FOB Destination.

CIF vs FOB Origin

Under FOB Origin, the seller must pack and clear goods for export, transport them to the port of origin and load them on the selected vessel. The seller is liable for the goods until they are available on board the chosen vessel at the port of origin. Although, when using CIF, the risk transfer occurs at the same point, when the goods are loaded on the ship,the seller is obligated to cover freight charges and insurance to the country of destination.

CIF vs FOB Destination

The main difference between CIF and FOB Destination Incoterms is insurance. Under FOB Destination, the seller agrees to deliver the goods to a named location in the buyer’s country and must cover all freight charges. However, unlike CIF, the seller is not obligated to purchase insurance coverage for the cargo. Another crucial difference is risk transfer. Under CIF, the buyer is responsible for goods once they are loaded on the vessel, while under FOB Destination, the seller is responsible for goods until they have been delivered.

Read more about each Incoterm:

CIF vs FOB – Pros and cons of each Incoterm

Advantages and disadvantages of shipping with CIF

For the buyer:

Compared to FOB, CIF is more convenient for buyers since it assumes fewer responsibilities for them. It is an ideal option for buyers who are unfamiliar with shipping overseas. However, the cost of CIF is much higher since the seller will charge a higher price to cover shipping and insurance. Another drawback is having less control over the shipment, which may be problematic in case of any damages and claims.

For the seller:

Using CIF Incoterm for the contract can generate higher margins for the seller as they may add additional fees for freight transport and insurance. However, the higher invoice comes with a higher risk for the seller.

Advantages and disadvantages of shipping with FOB

For the buyer:

The main advantage for buyers when using FOB is having more control and thus being able to make cost-effective decisions. Therefore, the buyer may find a freight forwarder with lower prices or insure the shipment with as much coverage as needed. It is recommended for buyers with experience in international shipping and trade.

For the seller:

FOB Incoterm is beneficial for the sellers because they assume less responsibility and do not worry about additional problems. This arrangement costs less to the seller but also brings less profit.

Customs procedures with CIF vs FOB Incoterms

When using FOB and CIF shipping terms, the seller and buyer follow the same rules:

  • The seller pays all the duties and taxes and prepares documentation for export in the country of origin.
  • The buyer is responsible for all import procedures, including paying duties and customs fees in the country of destination.

Learn more about customs procedures

FOB vs CIF Incoterms used in shipping: an overview


CIFFOB – OriginFOB – Destination
Type of transportMaritime and inland waterways cargoMaritime and inland waterways cargoMaritime and inland waterways cargo
Packing and inspectionSellerSellerSeller
Export dutiesSellerSellerSeller
Transport to the port of originSellerSellerSeller
Loading the goods on the named vesselSellerSellerSeller
Freight chargesSellerBuyerSeller
Import chargesBuyerBuyerBuyer
Unloading and handling at arrival at the named placeBuyerBuyerBuyer
Domestic transport to the named destinationBuyerBuyerBuyer
Risk transferOnce the goods are loaded on the selected vessel at the port of originOnce the goods are loaded on the selected vessel at the port of originOnce the goods arrive at the named destination in the buyer’s country
Insurance Mandatory. Purchased by the seller Non-mandatory Non-mandatory

Want more information about Incoterms?

As you can see, the differences between FOB and CIF depend on the FOB Incoterm being used. We recommend both exporters and importers read or complete guides for more information about FOB, CIF and other Incoterms:

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FOB vs CIF shipping terms comparison: FAQ

Which is better for the buyer, FOB or CIF?
The choice between CIF and FOB shipping terms will depend on the experience of the buyer and seller in international trade. When deciding which is better, FOB or CIF, we can say that CIF is recommended for importers without a lot of experience because the seller is responsible for transporting the goods to the port of destination and adding insurance to the goods. With CIF, the buyer will not have to find a reliable carrier and pay transport charges. On the other hand, FOB is usually recommended for buyers with experience who can find better deals with a freight forwarder.
Who pays for import and VAT when using CIF or FOB Incoterms?
The buyer must cover all import charges using CIF or FOB shipping terms. In both cases, the seller must assist the buyer with the necessary documentation, such as the Ocean Bill of Lading, a Commercial Invoice, a Packing List and Export Licences. When using CIF, the seller also must procure the Insurance Certificate proving sufficient coverage.
Is insurance compulsory when shipping under FOB Destination?
Although FOB Destination shares many similarities with CIF, one of the differences between FOB and CIF shipping terms is that adding insurance is not mandatory when using FOB. However, traders are advised to cover the cargo to avoid problems and complications in case of loss or damage.
Who pays for unloading the cargo when using CIF or FOB Incoterms?
The buyer must cover unloading and terminal handling charges at the destination under FOB and CIF shipping terms.
Can I use CIF or FOB shipping terms for container cargo?
No, neither CIF nor FOB is recommended for container cargo. Because the risk transfers when the cargo is loaded on the selected vessel, the seller must be able to make the goods available on the ship using their means, which is not possible when shipping containers. The ICC recommends using FCA for container shipping.