FOB (Freight On Board) vs CIF (Cost, Insurance and Freight)
|
Basis |
FOB (Freight On Board) | CIF (Cost, Insurance, and Freight) |
|---|---|---|
|
Definition |
FOB specifies when ownership and risk transfer from the seller to the buyer during shipping. | CIF covers the cost of goods, insurance, and freight until the goods reach the destination port. |
|
Responsibility for Shipping |
Seller’s responsibility ends when goods are loaded onto the transportation vessel. | The seller is responsible for arranging and paying for shipping, insurance, and freight to the destination port. |
|
Shipping Costs |
Buyer assumes responsibility for transportation costs from the point of loading onward. | Seller includes shipping, insurance, and freight costs in the sale price. |
|
Risk and Insurance |
Buyer assumes the risk and must arrange insurance coverage for the shipment. | The seller is responsible for obtaining and paying for insurance coverage during transit. |
|
Choice of Carrier |
Buyer has control over the choice of carrier and shipping method. | The seller selects the carrier and shipping method, and the buyer has limited control. |
|
Control Over Logistics |
Buyer manages the logistics, including selecting carriers and handling transportation arrangements. | Seller handles logistics until goods reach the destination port; limited control for the buyer. |
|
Damages and Losses |
Buyer is responsible for addressing any damages or losses that occur during transit. | The seller is responsible for addressing damages or losses until the goods arrive at the destination port. |
|
Common Usage |
Often used when the buyer wants more control over logistics and is comfortable managing transportation. | Commonly used when the seller has expertise in logistics and can secure better shipping rates or terms. |