|
Comparison Aspect |
FOB (Free On Board) |
CIF (Cost, Insurance, and Freight) |
|
Core Responsibility |
The seller is responsible for loading goods onto the vessel and bears risks/costs before shipment. |
The seller pays for freight and insurance to deliver goods to the port of destination but transfers risk at the port of shipment. |
|
Risk Transfer |
Risk shifts to the buyer once goods pass the ship’s rail at the port of shipment. |
Risk transfers to the buyer at the port of shipment (same as FOB), but the seller must purchase minimum - coverage insurance. |
|
Cost Liability |
Buyer pays: - International freight - Insurance - Import customs and taxes. |
Seller pays: - International freight - Insurance (minimum coverage, e.g., FPA) - Export customs fees. |
|
Transport Arrangement |
Buyer arranges shipping and notifies the seller of details. |
Seller arranges shipping and pays freight to the port of destination. |
|
Insurance |
Insurance is optional for the buyer. |
Seller must purchase insurance (minimum coverage) at 110% of the contract value. |
|
Export Procedures |
Seller handles export clearance and provides documents (e.g., bill of lading). |
Seller handles export clearance and provides documents (e.g., bill of lading, insurance policy). |
|
Import Procedures |
Buyer manages import clearance and pays taxes. |
Buyer manages import clearance and pays taxes (same as FOB). |
|
Applicable Transport Mode |
Maritime or inland waterway transport. |
Maritime or inland waterway transport. |
|
Typical Scenarios |
Used when buyers want control over logistics (e.g., specifying a freight forwarder). |
Chosen when sellers prefer to manage freight/insurance (e.g., bulk commodity trades) or buyers lack international logistics experience. |
