Demystifying FOB & CIF Terms
A beginner-friendly guide to understanding international shipping responsibilities. Learn who handles freight, insurance, risk, and customs clearance.
The Foundation of Import-Export Trade
When sourcing energy commodities like crude oil, LNG, or refined fuels, selecting the right shipping terms is crucial. Incoterms define the boundaries of cost, risk, and responsibility between buyers and sellers. The two most common options are FOB and CIF.
FOB (Free On Board)
Buyer-Controlled Logistics
Under FOB, the seller completes their delivery obligation once the goods have crossed the ship's rail at the designated port of loading. From that moment on, the buyer takes full control, bearing all costs, insurance premiums, and risks.
Seller Responsibilities:
- Transporting cargo to the loading port
- Handling export customs clearance & duties
- Loading goods onto the vessel
Buyer Responsibilities:
- Paying ocean freight & booking the vessel
- Securing marine cargo insurance (optional but recommended)
- Handling import customs clearance & delivery at destination
CIF (Cost, Insurance & Freight)
Seller-Managed Logistics
Under CIF, the seller is responsible for the delivery of goods to the designated port of destination, including paying for ocean freight transport and providing marine insurance against the buyer's risk of loss or damage during transit.
Seller Responsibilities:
- Transporting cargo, loading, and export clearance
- Booking and paying for ocean freight to destination port
- Paying for minimum marine cargo insurance coverage
Buyer Responsibilities:
- Unloading cargo at destination port
- Paying import customs duties, taxes, and clearance fees
- Onward inland logistics/delivery from destination port to facility
Responsibility Flow
Interactive Custody & Risk Transfer
Select an Incoterm below to visualize who pays for costs and holds risk at each phase.
Seller
Origin Point
Port of Loading
Export Customs & Loading
Vessel / Sea Transit
Ocean Voyage
Buyer / Destination
Import Port & Facility
Side-by-Side
FOB vs. CIF Comparison Matrix
A breakdown of roles, financial liabilities, and custody transfers.
| Feature / Metric | FOB (Free On Board) | CIF (Cost, Insurance & Freight) |
|---|---|---|
| Freight Cost | Paid by Buyer | Paid by Seller (up to destination port) |
| Insurance | Responsibility of Buyer (Optional) | Arranged & paid by Seller (Minimum Cover) |
| Export Clearance | Handled & paid by Seller | Handled & paid by Seller |
| Import Clearance | Handled & paid by Buyer | Handled & paid by Buyer |
| Risk Transfer | Transfers to buyer once loaded on ship | Transfers to buyer once loaded on ship (same as FOB) |
| Best For | Buyers with established logistics partners who want full control over freight negotiations, shipping paths, and delivery schedules. | Buyers who prefer a simplified transaction and want the seller to arrange the complex logistics of ocean freight and insurance. |
Support Desk
Frequently Asked Questions
Clear answers to common questions about international shipping guidelines.
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Whether you prefer the control of FOB or the convenience of CIF, our dedicated logistics coordinators can assist. Let us help you match your delivery requirements with compliant producers.
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