Nagpur, Maharashtra, India
Shipping & Logistics
Where cost, risk and control actually change hands under FOB and CIF, and how to compare offers quoted on different terms.
Introduction
FOB and CIF are the two terms most agricultural offers are quoted on, and they are not interchangeable. They allocate who arranges carriage, who pays freight, who carries insurance and where risk transfers from seller to buyer.
Comparing an FOB price to a CIF price without adjusting for freight and insurance is the most common costing error importers make.
Explanation
Under FOB, the seller delivers the goods on board the vessel at the named port of shipment. Export clearance is the seller's responsibility; from the moment risk transfers, the buyer bears cost and risk of carriage.
FOB suits buyers with their own freight contracts or nominated forwarders, because it gives full control of carrier choice, routing and freight rate.
Under CIF, the seller contracts carriage to the named destination port and buys marine insurance for the voyage. Risk still transfers when the goods are on board at the origin port, even though the seller pays freight onward.
CIF suits buyers who prefer a single delivered-to-port number and do not want to manage the ocean leg. Insurance cover under CIF is a minimum-cover obligation, so buyers wanting wider cover usually arrange their own additional policy.
To compare, bring both offers to the same basis. Add expected ocean freight and insurance to the FOB price, or strip them from the CIF price, then add destination charges, duties and inland delivery to reach a landed cost.
Both terms are defined in the Incoterms rules published by the International Chamber of Commerce. State the applicable Incoterms version and the named port in your contract.
Step by Step
The sequence our trade desk follows with buyers, from requirement to shipment.
If you hold freight contracts or need a specific carrier, choose FOB. If you want one delivered number, choose CIF.
Specify the port of shipment for FOB and the port of destination for CIF, with the Incoterms version referenced.
Check the cover level under CIF and buy supplementary cover if your risk profile requires more than the minimum.
Convert every offer to the same basis before comparing, then extend to landed cost with duties and local charges.
Common Mistakes
It does not. Under CIF the seller pays carriage to destination, but risk passes when the goods are on board at origin.
The term is meaningless without a named port. Costs differ materially between load ports and discharge ports.
Standard CIF insurance is a minimum obligation. High-value or sensitive cargo often warrants broader cover.
Terminal handling, customs, duties and inland transport sit outside CIF and must be added to reach landed cost.
Buyer Checklist
FAQ
Answers to the questions buyers raise most often on this topic.
Continue Exploring
Every guide links into the specifications, corridors and trade support pages it references.
Share your commodity, grade, volume, packaging and destination port. You receive a specification sheet and a commercial offer, not a generic price list.
This guide lives in Shipping & Logistics within the Agri Genius Exports Knowledge Hub. Permalink: /knowledge/shipping-logistics/fob-vs-cif-explained/
