FOB vs CIF (Incoterms 2020)
In both, risk passes when the goods are on board at the port of shipment. Under FOB the buyer pays the sea freight and insurance; under CIF the seller pays the freight to the destination port and minimum insurance.
Side by side
| FOB · Free On Board | CIF · Cost, Insurance and Freight | |
|---|---|---|
| Transport | Sea and inland waterway | Sea and inland waterway |
| Delivery and risk pass to the buyer | On board the ship at the port of shipment | On board the ship at the port of shipment |
| Main freight paid by Different | Buyer | Seller |
| Insurance Different | Not required | Seller must insure: ICC (C), 110% of value |
| Export clearance | Seller | Seller |
| Import clearance and duties | Buyer | Buyer |
| Unloading at destination | Buyer | Buyer |
Where risk and costs pass from the seller to the buyer
SellerBuyer
Origin → Main carriage → Destination. Simplified diagram: the exact point is the named place written after the rule. The costs line shows who pays the main carriage and, under DDP, the import duties and taxes.
Seller's obligations compared (A1–A10)
| FOB | CIF | |
|---|---|---|
| A1/B1 General obligations | Provide the goods and the commercial invoice as the contract requires, plus any other proof of conformity it asks for. Documents may be paper or electronic if agreed or customary. | Provide the goods and the commercial invoice as the contract requires, plus any other proof of conformity it asks for. Documents may be paper or electronic if agreed or customary. |
| A2/B2 Delivery and taking delivery | Deliver by placing the goods on board the ship nominated by the buyer, at the loading point indicated by the buyer at the named port of shipment, or procure goods so delivered; if no point is given, the seller may choose one. | Deliver by placing the goods on board the ship at the port of shipment, or procure goods so delivered. |
| A3/B3 Transfer of risks | Bears all risk until the goods are on board the ship. | Bears all risk until the goods are on board. |
| A4/B4 Carriage | No obligation to contract carriage; if agreed, the seller contracts it on usual terms at the buyer's risk and cost. Meets transport-related security requirements up to delivery. | Contract or procure carriage on usual terms, by the usual route, in a ship of the type normally used, from the port of shipment to the named port of destination; meet transport-related security requirements. |
| A5/B5 Insurance | No obligation to insure. At the buyer's request, risk and cost, give the information the buyer needs to buy insurance. | Buy cargo insurance at its own cost covering at least Institute Cargo Clauses (C), for at least 110% of the contract price in the contract currency, from delivery to at least the named port of destination, and give the buyer the policy or certificate. At the buyer's request and cost, add wider cover such as Clauses (A) or (B), war or strikes cover, if available. |
| A6/B6 Delivery or transport document | Provide, at its cost, the usual proof that the goods are on board, and help the buyer obtain a transport document. | Provide, at its cost, the usual transport document to the agreed port of destination. It must cover the goods, be dated within the shipment period, let the buyer claim the goods at destination and, unless agreed otherwise, sell them in transit; a negotiable bill of lading goes to the buyer as a full set of originals. |
| A9/B9 Allocation of costs | Pay all costs until the goods are on board, including loading, the proof of delivery and export clearance. | Pay all costs until the goods are on board, the loading and sea freight, the insurance premium, any unloading at the port of discharge and transit costs that the carriage contract puts on the seller, the transport document and export clearance. |
| A10/B10 Notices | Give the buyer sufficient notice that the goods have been delivered, or that the ship did not take them in time. | Notify the buyer that the goods have been delivered, and give any notice the buyer needs to receive them. |
When to use each rule
FOB
FOB is meant for sea and inland waterway transport where goods are loaded directly on board, such as bulk and break-bulk cargo. It is widely used for containers too, but the ICC recommends FCA for container shipments.
CIF
CIF is common for commodities and for sales paid by letter of credit, where the bank wants to see an insurance document. It is for sea and inland waterway only; for containers the ICC recommends CIP.
Compare other rules
A plain-language summary of Incoterms® 2020 for everyday use. The full rules are published by the International Chamber of Commerce (ICC), and your contract wording decides. Incoterms® is a registered trademark of the ICC.
Guides on this topic
Common questions
Does FOB include freight?
No. Under FOB the buyer books and pays the sea freight. The seller's price covers the goods delivered on board at the port of shipment.
What insurance does CIF require?
Cargo insurance on at least Institute Cargo Clauses (C) terms for 110% of the contract value, in the contract currency, covering the goods from delivery to at least the port of destination.
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