Choose FOB if you already have a freight forwarder you trust and want to control the routing; choose CIF if you want one invoice, one counterparty and no freight negotiation. For a first order into an unfamiliar port, CIF is almost always the right answer, and it is what we quote by default.
What the two terms actually transfer
| FOB (Free On Board) | CIF (Cost, Insurance and Freight) | |
|---|---|---|
| Seller arranges export clearance | Yes | Yes |
| Seller pays ocean freight | No | Yes |
| Seller buys marine insurance | No | Yes — minimum cover, Institute Cargo Clauses (C) |
| Risk passes to buyer | When goods are on board | When goods are on board |
| Buyer arranges import clearance | Yes | Yes |
Note the row that trips people up: under CIF the seller pays for the freight but the risk still passes at the ship rail, exactly as under FOB. CIF is a cost term, not a risk term. If the vessel is lost mid-ocean, that is the buyer claim against the insurance the seller bought, not the seller problem.
“CIF requires the seller to contract for insurance cover against the buyer risk of loss of or damage to the goods from the port of shipment to at least the port of destination.”
Why the minimum insurance cover matters for cars
CIF only obliges the seller to buy Institute Cargo Clauses (C) — a named-perils policy that does not cover handling damage, scratching or pilferage. For a vehicle, those are the three losses that actually happen. Ask for Clauses (A) all-risks cover on the proforma invoice; the premium difference on a single vehicle is a few tens of dollars and it is the cheapest line on the whole shipment.
The practical rule we give buyers
- First order, or a port you have not shipped to before: CIF with Clauses (A) insurance.
- Regular volume and your own forwarder with a negotiated rate: FOB, and you will usually beat our freight number.
- Letter of credit: CIF, because the bank wants a single document set from a single shipper.
- Rail to Central Asia: neither — use CPT or CIP, which are the multimodal equivalents. FOB and CIF are sea-and-inland-waterway terms only.
That last point catches people out often enough to be worth repeating: putting FOB on a rail shipment to Almaty is technically meaningless, and a careful bank will query it. Every proforma invoice we issue for the Khorgos rail route uses CIP.