FOB, CFR and CIF are Incoterms® 2020 rules for sea and inland-waterway transport. FOB generally requires the buyer to arrange the main carriage. Under CFR, the seller pays for carriage to the named destination port but risk transfers when the goods are on board at the shipment port. CIF works similarly to CFR but also includes the seller's obligation to arrange cargo insurance under the CIF rule.
FOB vs CFR vs CIF at a Glance
Free On Board
Seller delivers the goods on board the vessel at the named port of shipment. Buyer arranges the main carriage.
Cost and Freight
Seller pays the carriage to the named destination port, but risk transfers when the goods are on board at the shipment port.
Cost Insurance and Freight
Similar to CFR, but the seller also arranges insurance according to the CIF rule.
What Are Incoterms?
Incoterms® are standardised trade terms published by the International Chamber of Commerce. They are used in business-to-business sales contracts to clarify important responsibilities between sellers and buyers.
ICC's current edition is Incoterms® 2020 , which contains 11 trade terms.
The rules help clarify matters such as:
- Where delivery takes place.
- When risk transfers.
- Which party arranges carriage.
- Which party pays specified costs.
- Export and import formalities.
- Insurance obligations under applicable rules.
They do not replace the entire sales contract and should not be treated as a complete description of every commercial obligation between the parties.
FOB: Free On Board
Under Incoterms® 2020, FOB is a rule for sea and inland waterway transport.
The seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment. Risk of loss or damage transfers when the goods are on board the vessel.
Under FOB, the seller generally handles:
- Preparing the goods.
- Export clearance where applicable.
- Delivery to the point required for loading.
- Loading the goods on board the vessel.
The buyer generally handles:
- Main international carriage.
- Import clearance.
- Import duties and taxes where applicable.
- Costs after the relevant transfer point.
- Cargo insurance if the buyer wants coverage.
CFR: Cost and Freight
CFR means Cost and Freight.
Under CFR, the seller delivers the goods on board the vessel at the named port of shipment and contracts for and pays the freight required to bring the goods to the named port of destination.
An important point is that paying the freight does not mean that the seller carries the risk until the destination port.
Under the CFR rule, risk transfers when the goods are on board the vessel at the port of shipment.
CFR includes seller-arranged carriage
The seller contracts for the main carriage to the named destination port.
CFR does not include seller-arranged insurance
Unlike CIF, insurance is not part of the seller's obligations under CFR.
CIF: Cost Insurance and Freight
CIF means Cost Insurance and Freight.
CIF works similarly to CFR regarding delivery and carriage, but the seller also has an obligation to arrange insurance according to the CIF rule.
Under Incoterms® 2020, CIF is a rule for sea and inland waterway transport.
CIF includes seller-arranged freight
The seller contracts for carriage to the named destination port.
CIF includes insurance
The seller arranges insurance in accordance with the CIF rule. ICC's Incoterms® 2020 guidance states that CIF's default insurance obligation provides minimum cover, with the parties able to agree on higher coverage.
FOB vs CFR vs CIF Comparison
| Point | FOB | CFR | CIF |
|---|---|---|---|
| Full name | Free On Board | Cost and Freight | Cost Insurance and Freight |
| Transport scope | Sea and inland waterway transport | ||
| Main carriage arranged by | Buyer | Seller | Seller |
| Insurance arranged by seller? | No | No | Yes, under CIF obligation |
| Risk transfers | When goods are on board at shipment port | When goods are on board at shipment port | When goods are on board at shipment port |
| Import clearance | Buyer | Buyer | Buyer |
| Import duties and taxes | Buyer | Buyer | Buyer |
Cost vs Risk: The Most Important Difference
One of the most common mistakes among new importers is assuming that the party paying for freight is also the party carrying the transport risk.
Under both CFR and CIF, the seller pays for the main carriage to the named destination port, but the risk transfers when the goods are delivered on board the vessel at the shipment port under the relevant rule.
This distinction is particularly important when negotiating insurance and evaluating supplier quotations.
CIF vs CFR: What About Insurance?
This is one of the clearest differences between CFR and CIF.
No seller insurance obligation
The buyer should consider whether and how to arrange appropriate cargo insurance.
Seller arranges insurance
Insurance is part of the seller's obligations under the CIF rule, subject to the rule's coverage provisions.
ICC states that CIF's default insurance obligation under Incoterms® 2020 is minimum cover, while the parties can agree to higher coverage.
Example: Buying Cumin from India
Imagine a buyer in the Middle East wants to purchase a shipment of cumin seeds from an Indian exporter.
The exporter provides three hypothetical quotations:
| Quote | What it means | Buyer still needs to consider |
|---|---|---|
| FOB Mundra | Seller delivers the goods on board at the named shipment port. Buyer arranges main carriage. | Freight, insurance if desired, import clearance, duties, taxes and destination costs. |
| CFR Destination Port | Seller arranges and pays main carriage to the named destination port. | Insurance, import clearance, duties, taxes and applicable destination costs. |
| CIF Destination Port | Seller arranges carriage and insurance to the named destination port according to CIF. | Import clearance, duties, taxes and destination costs not allocated to the seller. |
How Buyers Should Compare FOB, CFR and CIF Quotes
Never compare only the number printed beside the Incoterm. Instead, compare the complete cost structure.
Which Incoterm Is Best for Spice Imports?
There is no universally "best" Incoterm.
The appropriate choice depends on the buyer's logistics capability, shipping arrangements, desired control over freight, insurance preferences, destination and commercial agreement.
FOB may suit buyers who:
- Have their own freight forwarder.
- Regularly import containers.
- Want control over the main carriage.
- Have negotiated competitive shipping rates.
CFR may suit buyers who:
- Want the exporter to arrange the main freight.
- Already have their own insurance arrangement.
- Want a freight-inclusive quotation without seller-arranged insurance.
CIF may suit buyers who:
- Want the seller to arrange the main carriage.
- Want seller-arranged insurance under the CIF rule.
- Prefer a simpler freight-and-insurance quotation structure.
An Important Point About Containerised Shipments
FOB, CFR and CIF are rules within the Incoterms® 2020 group for sea and inland waterway transport.
For containerised or multimodal shipments, the parties should consider whether another Incoterms rule is more appropriate for the actual delivery arrangement.
ICC's official Incoterms® 2020 framework distinguishes the rules for any mode or modes of transport from the rules specifically intended for sea and inland waterway transport.
Why the Named Port or Place Matters
Writing only "CIF" or "FOB" is not sufficient to describe the complete commercial arrangement.
The contract should identify the relevant named place or port associated with the selected Incoterm.
For example, a commercial quotation might identify a named port of shipment or named port of destination rather than simply stating "FOB India" or "CIF Middle East."
The named place is important because it helps establish where delivery occurs and how the relevant cost and risk obligations apply.
Buyer Checklist Before Accepting a Spice Quote
- Is the exact product specification stated?
- Is the quantity clearly defined?
- Is the packaging specified?
- Is the Incoterm clearly stated?
- Is the named port or place stated?
- Is the Incoterms version identified where appropriate?
- Is international freight included?
- Is insurance included?
- Who handles import clearance?
- Who pays import duties and taxes?
- Which destination charges remain with the buyer?
- Is the quotation directly comparable with competing quotes?
Related Guides for Spice Importers
- How to Calculate the Landed Cost of Spices from India
- Spice Export Documentation from India
- How to Choose a Reliable Indian Spice Exporter
- Cumin Seeds from India: Complete Buyer Guide
- Packaging & Labeling Requirements for Indian Spices
- View Kunshak Exports Products
Sourcing Spices from India?
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Frequently Asked Questions
Under Incoterms 2020, FOB, CFR and CIF are rules for sea and inland waterway transport. FOB places delivery and risk transfer when the goods are on board the vessel at the named port of shipment. Under CFR, the seller contracts and pays for carriage to the named destination port, while risk transfers when the goods are on board at the port of shipment. CIF works similarly to CFR but also requires the seller to arrange insurance according to the CIF rule.
Neither is automatically cheaper. FOB and CIF quote different allocations of costs, responsibilities and insurance. A buyer should compare the complete expected landed cost rather than simply choosing the lower quoted price.
FOB means Free On Board. Under Incoterms 2020, for the applicable sea or inland-waterway transaction, the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment, and risk transfers when the goods are on board.
CFR means Cost and Freight. The seller delivers the goods on board the vessel and contracts and pays for carriage to the named port of destination. Risk transfers when the goods are on board at the port of shipment.
CIF means Cost Insurance and Freight. The seller delivers the goods on board the vessel, contracts and pays for carriage to the named port of destination and arranges insurance in accordance with the CIF rule.
Yes. Insurance is part of the seller's obligations under CIF. Incoterms 2020 provides a specific insurance obligation under CIF, with the default level of cover being the minimum cover described by the rule unless the parties agree otherwise.
No. Insurance is not included in the seller's obligations under CFR. The buyer should consider arranging appropriate cargo insurance.
FOB does not make the seller responsible for the main international carriage to the destination port. The buyer is responsible for arranging the main carriage under the FOB rule.
There is no universally best Incoterm. The appropriate rule depends on the shipment, transport mode, buyer's logistics capability, desired cost allocation, insurance requirements and commercial agreement.
FOB, CFR and CIF belong to the Incoterms 2020 rules for sea and inland waterway transport. For containerised or multimodal shipments, the parties should consider an appropriate Incoterms rule for the actual transport arrangement.
Official sources consulted
Regulatory and commercial statements in this guide should be verified against the latest applicable Incoterms® rules and the terms agreed in the specific transaction.