FOB vs CIF – who pays for what?
FOB is Free On Board and CIF is Cost, Insurance and Freight. We compare who pays for transport, customs clearance and duty, and where risk passes to the buyer.
Key differences
Under CIF, the seller also covers the main freight and insurance. Under FOB, the buyer pays for this instead – except for insurance, which is not compulsory under FOB. Under both rules, risk passes to the buyer on board the vessel at the port of loading.
- Main carriage (freight)
- FOBBuyerCIFSeller
- Insurance
- FOBNo obligationCIFSeller
Full cost breakdown
| Cost | FOB | CIF |
|---|---|---|
| Export clearance | Seller | Seller |
| Transport to the port or terminal | Seller | Seller |
| Loading for main carriage | Seller | Seller |
| Main carriage (freight) | Buyer | Seller |
| Insurance | No obligation | Seller |
| Unloading at destination | Buyer | Buyer |
| Import clearance | Buyer | Buyer |
| Import duty and VAT | Buyer | Buyer |
| Risk passes | At the port of loading, when the goods are on board the vessel. | At the port of loading, when the goods are on board the vessel – even though the seller pays for freight and insurance. |
| Mode of transport | Sea and inland waterway transport only | Sea and inland waterway transport only |
Notes
- CFR and CIF – the main freight ends at the port of destination. Transport from the port to the warehouse is paid by the buyer, while under the D rules (DAP, DPU, DDP) this leg is the seller’s responsibility if the place of delivery is a warehouse.
- Unloading at destination: if unloading costs are included in the contract of carriage concluded by the seller, the seller pays them and cannot charge them to the buyer afterwards.
- Insurance: only the seller is obliged to insure, and only under CIF (at least Institute Cargo Clauses (C), 110% of the value) and CIP (Institute Cargo Clauses (A), 110% of the value). Under the other rules, nobody has to insure the goods – but once risk has passed, any loss is borne by the buyer.
What to watch for when importing from China
FOB Free On Board
A common mistake: FOB for rail or air freight. FOB applies only to sea and inland waterway transport. For rail freight from China, the right rule is FCA with the name of the terminal (e.g. “FCA Xi’an, rail terminal”), and for air freight, FCA with the name of the airport. Under FOB, the supplier pays for export clearance and the charges at the port of loading – check that they are not added to the invoice separately.
More about FOB →CIF Cost, Insurance and Freight
CIF works like CFR, but the supplier also insures the goods – though only with minimum cover (Institute Cargo Clauses (C), 110% of the value of the goods), unless you agree on broader cover. The policy is usually issued by a Chinese insurer, so you would have to pursue any claim abroad. Check the scope of the policy or insure the goods in Poland.
More about CIF →When to use FOB and when to use CIF?
- FOB – for sea freight, when the supplier delivers the goods to a port in China and handles export clearance, while your freight forwarder arranges the freight to Europe.
- CIF – for sea freight, when the supplier arranges freight and insurance, and the policy’s minimum cover is enough for you – or you will arrange broader cover.
Buying on FOB terms? You choose the forwarder
We organise transport from China – by rail, sea or air – together with customs clearance in Poland and cargo insurance. Send us your cargo details and we will prepare a quote tailored to your shipment.
Request a quoteFAQ
What is the main difference between FOB and CIF?
Under CIF, the seller also covers the main freight and insurance. Under FOB, the buyer pays for this instead – except for insurance, which is not compulsory under FOB. Under both rules, risk passes to the buyer on board the vessel at the port of loading.
Where does risk pass to the buyer under FOB?
At the port of loading, when the goods are on board the vessel.
Where does risk pass to the buyer under CIF?
At the port of loading, when the goods are on board the vessel – even though the seller pays for freight and insurance.
Can FOB and CIF be used for rail freight from China?
No. FOB and CIF apply only to sea and inland waterway transport. For rail or air freight from China, the rules for any mode of transport are used instead – e.g. FCA, CPT or CIP.
Compare other pairs
Incoterms® is a registered trademark of the International Chamber of Commerce (ICC). This page is an independent, simplified summary of how costs and risks are divided – it is not affiliated with or approved by the ICC. When drafting contracts, use the official text of the Incoterms® 2020 rules published by the ICC.