Ask for FOB if you have a freight forwarder you trust and enough volume to negotiate ocean rates; ask for CIF if you are buying one or two units, or shipping into a port where you have no agent. The critical point that trips up first-time importers is that CIF does not extend the seller's risk — under Incoterms 2020 risk passes to the buyer when the goods are on board in both terms. CIF only moves who pays for the freight and the insurance.
What does FOB actually include?
Free On Board means the seller delivers the vehicle on board the vessel at the named port of shipment — Shanghai, in our case — and clears it for export. Everything from that point is yours: ocean freight, marine insurance, destination terminal handling, customs clearance and inland delivery.
- Included: the vehicle, export packing or lashing, inland haulage to the port, export customs clearance, terminal handling at origin, loading on board.
- Not included: ocean freight, marine insurance, destination terminal handling, import duty and taxes, customs clearance, inland delivery.
What does CIF add?
Cost, Insurance and Freight adds the ocean freight to the named destination port and a minimum-cover marine insurance policy. Note the word minimum: CIF obliges the seller to buy only Institute Cargo Clauses (C) cover, which is a restricted named-perils policy, not the all-risks cover most importers assume they are getting.
“The seller must obtain, at its own cost, cargo insurance complying at least with the minimum cover provided by Clauses (C) of the Institute Cargo Clauses.”
On a new commercial vehicle, Clauses (C) cover is thin. If you take CIF, either instruct the seller to upgrade the policy to Clauses (A) and pay the difference, or buy your own supplementary cover. We quote the upgrade on request and state the clause level on every proforma invoice.
When is CIF genuinely the better choice?
| Situation | Ask for |
|---|---|
| 1–3 units, first order, no forwarder relationship | CIF |
| Regular volume, negotiated ocean rates | FOB |
| Destination with thin carrier competition | CIF — the seller's rate is usually better |
| Destination where you hold a freight contract | FOB |
| Consolidating several suppliers into one shipment | FOB |
| Letter of credit that requires a marine bill of lading and insurance certificate | CIF |
What about CFR, DAP and DDP?
CFR is CIF without the insurance — the seller pays freight, you insure. DAP delivers to a named place in the destination country with the seller carrying transit risk all the way, and DDP adds import clearance and duty. We quote FOB and CIF as standard and CFR on request. We do not quote DDP for vehicles, because import duty on a motor vehicle is the buyer's obligation in nearly every jurisdiction and a seller who prices it is guessing at a number that changes.
The mistake that costs the most money
Accepting a CIF price to a port you have not checked for a car-carrier rotation. If the destination has no regular Ro-Ro service, the freight quoted will assume containerised shipping, and a vehicle that arrives in a container at a terminal without the equipment or the customs procedure to devan it can sit for weeks accruing demurrage. Confirm the routing before you accept the term, not after.
