FOB vs CIF: which Incoterm should you use?
FOB (Free On Board) versus CIF (Cost, Insurance and Freight) — who pays freight, where risk transfers, and what each choice does to your landed cost. Last reviewed 16 July 2026.
Under FOB the buyer books and pays for sea freight; under CIF the seller does and adds basic insurance. Risk transfers on board the vessel in both.
FOB vs CIF at a glance
| Factor | FOB — Free On Board | CIF — Cost, Insurance and Freight |
|---|---|---|
| Group | F — Main carriage unpaid | C — Main carriage paid |
| Transport mode | Sea & inland waterway | Sea & inland waterway |
| Who pays main freight | Buyer | Seller |
| Insurance obligation | No obligation on either party | Seller must insure — minimum cover only (Institute Cargo Clauses C) |
| Risk transfers | When goods are loaded on board the vessel at the named port of shipment | When goods are loaded on board at the port of shipment — before the seller-paid freight |
| Export clearance | Seller | Seller |
| Import clearance | Buyer | Buyer |
| Best for | Traditional sea freight where the buyer arranges and controls the main carriage | Sea freight where the buyer wants a single quote covering goods, freight and basic insurance |
Based on the Incoterms 2020 rules (ICC). Always confirm the exact obligations in your sales contract — as of 16 July 2026.
When to choose FOB
Choose FOB when you want to control the main carriage yourself. You appoint the freight forwarder, negotiate the ocean rate, and see exactly what shipping costs — which usually beats the marked-up freight buried in a CIF price. FOB suits buyers with regular volumes, a trusted forwarder, and the appetite to manage the booking from the port of loading onward.
When to choose CIF
Choose CIF when you would rather the seller arrange freight and minimum insurance to the destination port, and you are happy to pay for that convenience in one quote. CIF is common for first-time importers, one-off orders, or lanes where the supplier gets far better freight rates than you can. Just remember the insurance is bare-minimum cover, so most importers top it up.
What it does to your landed cost
The choice shifts who books freight, not who ultimately pays — a CIF price simply bundles ocean freight and thin insurance into the goods figure, often with a margin on top. Duty and import VAT are then charged on that CIF customs value, so a padded freight line quietly inflates your tax base. Under FOB you pay freight directly and can shop it, but you add your own insurance and destination charges. To see which lands cheaper per unit for your order, run both scenarios through the calculator.
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