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The short version
- FOB (Free On Board): the supplier loads the goods on the ship and you pay the ocean freight and insurance. CIF (Cost, Insurance and Freight): the supplier pays them up to your destination port.
- Risk is the same for both. It passes to you when the goods are on board the vessel in China, even though under CIF the supplier paid for the sea leg.
- Both rules are for sea and inland waterway freight only. For air, courier or most container shipments, other Incoterms fit better.
- Customs value differs by country: the US and Canada value goods without international freight, while the EU adds freight and insurance to the value. For most small importers, FOB is the clearer choice.
What is the difference between CIF and FOB?
The difference between CIF and FOB is who pays for the ocean freight and the cargo insurance: under CIF the seller pays both up to your destination port, under FOB you pay both from the moment the goods are on board. Both are Incoterms 2020 rules from the International Chamber of Commerce (ICC), and both end the seller's duty to deliver when the goods are loaded on the ship at the port in China. Our Incoterms explained guide shows all eleven rules side by side.
| FOB | CIF | |
|---|---|---|
| Full name | Free On Board | Cost, Insurance and Freight |
| Named place | Port of shipment (FOB Ningbo) | Port of destination (CIF Los Angeles) |
| Export clearance in China | Seller | Seller |
| Loading on the ship | Seller | Seller |
| Ocean freight to destination port | Buyer | Seller |
| Cargo insurance | Buyer (if wanted) | Seller (minimum cover required) |
| Risk passes to buyer | On board the vessel at origin | On board the vessel at origin |
| Destination port fees, import duty, delivery | Buyer | Buyer |
| Transport modes | Sea and inland waterway only | Sea and inland waterway only |
What does FOB mean?
Under FOB, the supplier gets the goods to the port, clears them for export and loads them on board the vessel you or your forwarder booked. The quote names the loading port, like FOB Shenzhen or FOB Ningbo. After loading, the ocean freight, insurance, destination charges, duties and delivery are yours. For the other common starting point, see FOB vs EXW.
What does CIF mean, and what about CFR?
Under CIF, the supplier does everything it does under FOB and also books the ocean freight to the destination port you name and buys cargo insurance. The quote names the destination, like CIF Los Angeles or CIF Vancouver. Three details matter:
- The insurance is minimum cover. Incoterms 2020 require at least Institute Cargo Clauses (C) cover, for 110% of the contract price, in the contract currency. That is basic cover. You can ask for broader cover, usually at your cost.
- The supplier chooses the carrier. You lose control over the shipping line, the routing and the schedule.
- Your costs do not stop at the port. Terminal handling at destination, customs clearance, duties and delivery are still yours.
CFR (Cost and Freight) is CIF without the insurance. The supplier pays the ocean freight to the destination port, you arrange any insurance, and risk still passes on board at origin. If a supplier quotes CFR, buy your own cargo insurance before the goods ship.
A CIF quote does not mean you are protected on the whole trip. The insurance is basic, the policy is the supplier's, and the claim process can be slow. Ask for the insurance certificate showing you as the beneficiary, or buy your own policy.
Where does risk transfer under CIF and FOB?
At the same point for both: when the goods are on board the vessel at the port of shipment. This surprises people. Under CIF the seller pays for the voyage, but if the container falls overboard in the Pacific, the loss is yours to claim from the insurer. That is the entire purpose of the insurance clause.
A practical note from the ICC: when goods go in containers they are usually handed to the carrier at a terminal before loading, so FCA (for FOB) and CIP (for CIF) fit container shipping better. Many Chinese suppliers still quote FOB and CIF for containers, and most small importers use them without trouble.
Why does customs value differ for CIF and FOB?
Customs duty is a percentage of the customs value, and countries do not agree on how to measure it. Whether your supplier quotes FOB or CIF can change the base the duty is charged on.
| Destination | How customs value treats ocean freight and insurance | Practical effect |
|---|---|---|
| United States | Excluded. Transaction value does not include international freight and insurance (CIF charges). Source: 19 CFR 152.103. | Duty is on the FOB-type price. On a CIF invoice, freight and insurance should be shown separately so they can be deducted. |
| Canada | International freight from the point of direct shipment to Canada is excluded from value for duty. CBSA memorandum D13-4-1. | Duty is on an FOB-type value. Itemize freight on the invoice and confirm insurance treatment with your broker. |
| European Union | Customs value includes transport and insurance costs up to the point of entry into the EU customs territory. | A CIF value is the normal starting point, and FOB prices get freight and insurance added. |
Tariff and valuation rules are as of October 2026 and can change. Your customs broker should confirm how your goods are valued.
For a US or Canadian importer, this means a lump-sum CIF price can overstate your dutiable value if freight and insurance are not broken out. At today's stacked tariff rates on Chinese goods, the gap matters. See the tariffs on China imports page for current layers.
CIF vs FOB: a worked example
This is an illustrative example, not a quote. A supplier quotes 1,000 units at $4.05 FOB Shenzhen ($4,050) or $4.50 CIF Los Angeles ($4,500). The $450 gap is freight and insurance. Your forwarder quotes the same sea freight at $330 plus $30 insurance. Assume a stacked US duty rate of 42.5% (5% normal duty + 25% Section 301 + 12.5% forced-labor tariff). Your own rate depends on the HTS code.
| Line (example) | FOB, you book freight | CIF, supplier books freight |
|---|---|---|
| Goods | $4,050.00 | $4,050.00 |
| Ocean freight and insurance | $360.00 (your forwarder) | $450.00 (built into the CIF price) |
| Cost to destination port | $4,410.00 | $4,500.00 |
| Customs value for US duty | $4,050.00 | $4,050.00 if freight is itemized, $4,500.00 if not |
| Duty at 42.5% | $1,721.25 | $1,721.25 or $1,912.50 |
Illustrative example. Destination port fees, customs fees and delivery are the same under both terms, so they are left out.
In this example, CIF costs $90 more before duty, and if the invoice does not separate freight, you could overpay $191.25 in duty on the same goods. CIF is not always more expensive: a supplier with a strong freight contract can beat what you can book alone. The way to know is to ask both prices and compare, or run both through the free landed cost calculator.
What is the difference between FOB, CIF and DDP?
This is a common search because the three sit at different points on the cost ladder. FOB hands you the shipping, CIF includes the sea leg, and DDP includes everything. Read our DDP meaning guide for the detail on the third.
| FOB | CIF | DDP | |
|---|---|---|---|
| Seller delivers to | On board at the loading port | On board at the loading port (price covers freight to destination port) | Your named address, cleared for import |
| Ocean freight | Buyer | Seller | Seller |
| Cargo insurance | Buyer | Seller (minimum cover) | Seller (not required by the rule) |
| Import clearance and duties | Buyer | Buyer | Seller |
| Delivery to your door | Buyer | Buyer | Seller |
| Risk passes | On board at origin | On board at origin | At destination, ready to unload |
| Transport modes | Sea only | Sea only | Any mode |
| Best for | Control and easy quote comparison | Buyers who want the sea leg handled | Hands-off, door-to-door delivery |
Which should a small importer choose?
For most small importers, FOB. You see the freight and insurance as separate lines, you choose your forwarder and policy, and your customs value stays clean. CIF can make sense in a few cases:
- First order, small shipment, and you do not have a forwarder yet. A CIF quote gets the goods to your port while you set up a broker.
- The CIF price is not higher than FOB plus your own freight quote, and the invoice itemizes freight and insurance.
- You get the insurance certificate in your name and you are happy with the cover level.
- Otherwise ask for FOB, or for CIF with freight and insurance shown as separate invoice lines.
Ask every supplier to quote the same term and the same port, and ask for both FOB and CIF. The pair of prices tells you what the supplier is charging for freight, and it is a good test of whether you can beat it.
What are FOB, CIF and CFR called in Chinese?
| Term | Chinese | Pinyin | Meaning |
|---|---|---|---|
| FOB price | 离岸价 | lí'àn jià | Price with goods loaded at the origin port; formal name 装运港船上交货 |
| CIF price | 到岸价 | dào'àn jià | Price including freight and insurance to the destination port; formal name 成本加保险费加运费 |
| CFR price | 成本加运费 | chéngběn jiā yùnfèi | Cost and freight, no insurance |
| Port of loading | 起运港 / 装运港 | qǐyùn gǎng | Origin port, such as Shenzhen |
| Port of destination | 目的港 | mùdì gǎng | Port where the ship unloads |
| Ocean freight | 海运费 | hǎiyùn fèi | Sea freight charge |
| Cargo insurance | 货运险 | huòyùn xiǎn | Insurance on the goods in transit |
When a supplier writes 报价 CIF 洛杉矶, ask them to split the price into 货价 (goods), 海运费 and 保险费 so you can compare against an FOB quote and show customs the real goods value. Our shipping from China guide covers what happens next.
See what each unit really costs you
The free landed cost calculator adds freight, insurance, duty and fees to your FOB or CIF price. For bilingual supplier messages, RFQ wording and the rest of our sourcing templates, see the China Sourcing Toolkit.
Frequently asked questions
What is the difference between CIF and FOB?
Under FOB, the supplier loads the goods on the ship and you pay the ocean freight and insurance. Under CIF, the supplier pays the freight to your destination port and buys minimum cargo insurance. Risk passes to you at the same point for both: on board the vessel at the port of shipment.
What is the difference between FOB, CIF and DDP?
FOB ends the seller's job at loading on the ship. CIF adds ocean freight and minimum insurance to the destination port. DDP covers everything to your door, including import clearance, duties and taxes, and the risk stays with the seller until arrival.
Who pays for insurance under CIF?
The seller buys it, but for your benefit. Incoterms 2020 require minimum cover (Institute Cargo Clauses C) for at least 110% of the contract price. Ask for the certificate and consider broader cover.
Is CIF or FOB cheaper?
It depends. CIF bundles freight and insurance at the supplier's rate, which can be higher or lower than what your forwarder would charge. Get both quotes and compare the total cost to your destination port.
Is customs duty charged on FOB or CIF value?
It depends on the country. The US and Canada exclude international freight from customs value, so they use an FOB-type value. The EU includes transport and insurance up to the EU border, so it uses a CIF-type value. Confirm with your customs broker.
Can I use FOB or CIF for air freight?
No. FOB, CIF and CFR are for sea and inland waterway transport only. For air, courier or most container shipments, rules like FCA, CPT, CIP or DAP fit better.
Based on Incoterms 2020. Customs valuation rules are as of October 2026 and can change. Cost figures are illustrative examples, not quotes. This guide is general information, not legal or customs advice. SuanSupply is not affiliated with the International Chamber of Commerce or any customs authority.