CIF vs FOB: differences, responsibilities and when to use
CIF and FOB are two of the most used Incoterms in international trade. Understanding who pays what and when risk transfers is essential.
30-second summary
1) Who pays freight
FOB: buyer
Under FOB, the buyer manages international shipping.
2) Who buys insurance
CIF: seller
Under CIF, the seller includes freight and insurance.
3) When risk transfers
At the port of shipment
Risk typically transfers at the origin port.
The key difference between CIF and FOB
- FOB: the buyer pays international freight and insurance.
- CIF: the seller arranges freight and insurance up to the port of destination.
- Risk typically transfers at the port of shipment.
- Total logistics costs can vary significantly between the two models.
What to evaluate before choosing
- ✓ Buyer capability to negotiate and manage international freight.
- ✓ Seller experience organizing international logistics.
- ✓ Real cost comparison of freight and insurance.
- ✓ Desired level of control over the logistics operation.
How to choose between CIF and FOB
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1Evaluate logistics experienceExperienced buyers often prefer FOB.
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2Compare total costsCIF can reduce operational complexity but limits control.
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3Consider risk managementUnderstanding the risk transfer point helps avoid surprises.
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