What is the difference between FOB and CIF?
Updated: 2026-10-14
Short answer
With FOB (Free on Board), the buyer generally arranges and pays for the main ocean freight and insurance if needed. With CIF (Cost, Insurance and Freight), the seller pays for ocean freight and minimum required insurance to the named destination port. Under both rules, risk generally transfers to the buyer when the goods are loaded on board the vessel at the port of shipment.
What Is FOB?
FOB stands for Free on Board. Under FOB Incoterms® 2020, the seller delivers the goods on board the vessel nominated by the buyer at the agreed port of shipment and completes the required export clearance. Risk transfers to the buyer when the goods are on board. The buyer generally arranges and pays for the main ocean freight, destination charges, and any insurance the buyer wants.
What Is CIF?
CIF stands for Cost, Insurance and Freight. The seller arranges and pays for ocean freight and insurance to the named destination port, as well as delivery on board and export clearance. However, the seller's payment of freight and insurance does not mean the seller keeps the risk until arrival. Risk transfers to the buyer when the goods are loaded on board the vessel at the port of shipment. CIF requires the seller to provide the insurance cover specified by the rule; buyers should check whether additional coverage is appropriate.
Key Differences Between FOB and CIF
The main difference is who arranges and pays for the main sea transport and insurance. FOB gives the buyer more control over freight arrangements, while CIF includes seller-arranged freight and insurance in the quoted price to the named destination port. In both cases, the buyer should confirm what destination handling, customs clearance, duties, taxes, and final delivery costs are excluded.
When Should You Use FOB or CIF?
FOB may suit a buyer who wants to choose the carrier or negotiate ocean freight directly. CIF may suit a buyer who prefers the seller to arrange ocean freight and insurance to the named port. Both terms are intended for sea or inland waterway transport. For containerized goods handed to a carrier at a terminal before they are loaded onto a vessel, FCA may be more appropriate than FOB. See the ICC Incoterms® 2020 guidance at https://iccwbo.org/business-solutions/incoterms-rules/incoterms-2020/.