Archive for January, 2022

CIF vs FOB: What’s the Difference?

January 12th, 2022

fob shipping

As mentioned, there are two distinct types of FOB shipping terms, and there are additional add-on terms that buyers use to reduce or extend the responsibility to the seller in FOB shipping. In a nutshell, in FOB Shipping Point (or FOB Origin), the seller is responsible for loading the goods onto the vessel. The buyer is responsible for everything else necessary to get the goods to the final destination.

  • This becomes significant when you make out your financial statements for the quarter or any other period.
  • The answer is that the delivery point in the FOB Incoterms® 2020 rule is when the goods are delivered on board the vessel by the seller.
  • If you are new to purchasing FOB from China, it will be beneficial for you to understand the overall shipping process and what to expect when you begin communicating with Chinese suppliers in your next production.
  • They can include the physical handling and loading of the goods, the cost of transporting them to the vessel, shipping and insurance.

Specifically, CFR refers to an agreement that stipulates it’s the seller’s duty to clear goods for export, delivery and port onboarding. CIF, however, refers to an agreement whereby the seller covers any costs pertaining to costs, insurance and freight of a buyer’s product while in transit. Once the product arrives at the port, the buyer is responsible for costs such as import duties, loading costs and import duties. The significant difference is that CIF places the cost of shipping and insurance on the seller, unlike a FOB agreement where these are the buyer’s responsibilities.

What is an example of FOB shipping point?

The responsibility transfers to the buyer as soon as the goods are loaded onto the nominated shipping vessel. The buyer takes responsibility for the remainder of the transport, including the delivery to the destination port. FOB Incoterms are also the most cost-effective option, as it allows the buyer to shop for the best possible shipping rate.

fob shipping

FOB terms are the linchpin in determining who bears the shipping costs and responsibilities in a transaction. Whether it’s “FOB Origin” or “FOB Destination,” these terms spell out whether the buyer or seller pays the freight charges and at what point ownership passes between the two parties. The term “shipping point” might seem straightforward, but when paired with FOB, it takes on a much more nuanced meaning. A shipping point generally refers to the location where goods begin their journey to the final destination.


This could be a seller’s loading dock, a shipping port, or an originating port where a freight forwarder consolidates shipments. Buyers can calculate the total costs of a FOB agreement by combining the FOB price from the seller and requesting a quotation from their freight forwarding company for the logistics. A Free on Board contract is much cheaper than a cost, insurance, and freight agreement. That’s because buyers have more control over the shipping logistics, including insurance and transport costs. Buyers are able to sign with the shipper of their choice and take as much coverage as they see fit to insure their shipments.

Under CPT, or “carriage paid to,” the seller pays for delivery of goods to a carrier or nominated location and assumes risks until the carrier takes possession. Freight collect means the person receiving the shipment is responsible for all freight charges. They also assume all risks and are responsible for filing claims in the case of loss or damage.


If you are shipping less than container load (LCL), your cargo will be loaded onto the truck and taken to a warehouse to consolidate your shipment with the other consignments sharing the same container. The above five items are the essential pieces of information a freight forwarding company would need. Before you can obtain an accurate quotation from your logistics company, it is best to confirm the carton dimensions and weight and address where the collection with your supplier with taking place. Once you have all of the above information, requesting a quotation from your supplier is easy, and you should be able to get your shipping rates in a couple of hours. In this article, we’ll delve into what a freight forwarder actually is and does, how their costs are calculated, and where you might find a reputable agent if you decide you want to get some help with your shipment. However, importing is an expensive process, and you’ll want to evaluate all your options, to make sure you get the right deal for your business.

  • Incoterms define the international shipping rules that delegate responsibility of buyers and sellers.
  • If you are shipping a full container load (FCL), the truck will carry the container to the seller’s warehouse, and the seller will load the cargo directly into the container.
  • That’s because what you’re buying from the supplier includes not only the goods themselves, but also their transport to a port, and everything else needed to clear export customs.
  • Buyers and sellers often confuse FOB by understanding the shipment can be sent by any mode of transportation; this is not correct.

Free on Board is an Incoterm that evenly splits the responsibilities between buyers and sellers. Additionally, the buyer doesn’t have the opportunity for the delivery to be made to its final destination. Instead, the goods arrive at their destination port, and the buyer must arrange any onward carriage to the warehouse. One of the main advantages of FOB is that each party’s responsibilities give most control while the cargo is in their territory and allows them to handle customs clearance in their own jurisdiction. Additionally, FOB should not be used for containerised cargo because it becomes impossible to pinpoint when any potential damage occurs, making it difficult to determine who is liable between the buyer and seller. If you are searching for a shipping policy that evenly splits responsibilities between both parties, then FOB might be the right choice for you.