Two abbreviations appear on almost every export quote, and they decide where your responsibility ends and your buyer’s begins. Getting them wrong means paying for a leg of the journey you never agreed to.
What FOB actually means
Free on Board. You cover everything up to the moment the cargo is loaded onto the vessel: inland transport, export packing, port charges and export clearance. From that point on, sea freight, insurance and everything at the destination is your buyer’s cost.
What CIF actually means
Cost, Insurance and Freight. You cover everything FOB covers, plus the sea freight and marine insurance all the way to your buyer’s port. Your buyer picks up the cost from arrival onwards: import clearance, duties and delivery.
Which one to quote
- FOB is simpler for a first time exporter, because your obligation ends at a point you can see and control.
- CIF gives your buyer a single landed price, which makes your offer easier to compare and often easier to accept.
- Many international buyers state which term they want. If they do, quote that term rather than converting it yourself.
The mistake that costs money
Quoting a price without naming the term. If you send a figure and the buyer assumes it is CIF while you meant FOB, the difference is the entire ocean freight bill. Always write the term and the named port next to your price, for example FOB Benoa or CIF Rotterdam.
Insurance is not optional under CIF
Under CIF you are contractually required to arrange marine insurance for the buyer’s benefit. Skipping it to save cost puts you in breach if anything happens during the voyage.
A simple way to decide
If you are new to exporting and want the least risk, quote FOB. If you want to compete on a clean landed price and you have a forwarder who can price the ocean leg reliably, quote CIF. Either way, decide before you send the quote, not after.
Not sure which term fits your buyer and your route? Send us the destination and cargo details and we will tell you which one makes more sense, free of charge.
