Knowledge Class | FOB and CIF, what's the real difference?

✅ FOB (Free On Board) means the seller is responsible for loading the goods onto the ship. After the goods are on board, the buyer takes over the shipping costs and risks.

✅ CIF (Cost, Insurance and Freight) means the seller not only handles loading the goods onto the ship but also pays for the ocean freight and minimum insurance until the goods reach the destination port.

The simplest way to understand it:

FOB:

The buyer arranges shipping and controls the transportation process.

CIF:

The seller arranges shipping and buys minimum insurance.

⚠️ Important to note (Incoterms® 2020):

Many people think that under CIF, the risk only transfers when the goods arrive at the destination port. But that's not true. According to Incoterms® 2020, the risk for both CIF and FOB transfers to the buyer once the goods are loaded onto the ship.

The biggest difference between the two is:

* FOB: The seller does not cover ocean freight or insurance.

* CIF: The seller covers ocean freight and minimum insurance.