The difference between FOB and CIF lies in who pays the main sea freight and the insurance: under FOB both fall on the buyer, under CIF on the seller. Under both rules, however, risk passes to the buyer when the goods are loaded on board the vessel at the port of loading. So even though the seller pays the freight under CIF, the risk of damage during the voyage stays with the buyer.
What do the two rules have in common, and where do they differ?
FOB (Free On Board) and CIF (Cost, Insurance and Freight) are Incoterms® 2020 rules used only for sea and inland waterway transport. Under both, delivery takes place at the port of loading, the moment the goods are loaded on board the vessel. Where they part ways is in who bears the cost of the sea voyage after delivery.
| Topic | FOB | CIF |
|---|---|---|
| How is the rule written? | FOB + port of loading (FOB Mersin) | CIF + port of destination (CIF Hamburg) |
| Main freight | Buyer | Seller |
| Who chooses the vessel and the line? | Buyer | Seller |
| Insurance | No obligation; the buyer takes it out because the risk lies with the buyer | Seller, with at least ICC (C) cover and on 110% of the contract price |
| Transfer of risk | On loading on board at the port of loading | On loading on board at the port of loading |
| Export customs clearance | Seller | Seller |
| Import customs clearance and duties | Buyer | Buyer |
Why does the risk lie with the buyer under CIF?
Because CIF is named after a port of destination, people often assume the seller is responsible for the goods all the way there. In fact CIF has two separate critical points: risk passes at the port of loading, while costs remain with the seller up to the port of destination. If the vessel runs into a storm and the cargo is damaged, the loss belongs to the buyer; the buyer claims compensation from the insurance the seller took out for its benefit. That is why under CIF the insurance policy or certificate is issued in a form that can be transferred to the buyer. Since the minimum ICC (C) cover is narrow, the buyer may have an ICC (A) clause written into the contract. For a rule-by-rule explanation, see the FOB delivery term and CIF delivery term entries.
How does it affect the price quotation?
A CIF price is roughly the FOB price plus the main freight and the insurance premium. A hypothetical example:
- FOB Mersin value of goods: USD 100,000
- Mersin–Hamburg main freight: USD 3,200
- Insurance premium (1.5 per mille on a 110% value of about USD 113,700): about USD 170
- CIF Hamburg price: about USD 103,370
Under CIF the seller carries freight fluctuations; unless the quotation validity is kept short, a freight increase comes out of the seller's margin. Under FOB the buyer negotiates the freight itself but has to coordinate the vessel booking and loading date with the seller.
How does it affect the customs value?
In Türkiye, under Article 27 of Customs Law No. 4458 (4458 sayılı Gümrük Kanunu), the customs value on import includes transport and insurance costs up to the port of entry in Türkiye; in other words, the tax base is CIF-based. For goods bought on FOB terms, the same base is reached by attaching the freight and insurance invoices to the declaration. The delivery term does not change the amount of duty, but it does change the burden of proof: in an FOB purchase the freight and insurance documents must be submitted in full. For the calculation method, see the entry how customs value is calculated.
Which one favours whom?
- CIF suits the seller: for a seller with strong freight agreements with shipping lines who wants to give the buyer a single price.
- FOB suits the buyer: for a buyer with its own forwarder and an annual open cover policy who wants to control transit time and destination costs.
- Neither is ideal for containerised cargo: Since containers are handed over at the terminal, the ICC recommends FCA instead of FOB and CIP instead of CIF; the reasoning is explained in the entry FCA instead of FOB for container cargo.
How does Voltim Global support you on this?
In its sea freight quotations, Voltim Global shows separately, according to the delivery term, which party the freight will be invoiced to and where destination port charges begin. Insurance cover is checked on the logistics insurance side according to the chosen rule.