Short answer
The delivery term (Incoterm) determines what the price covers and where risk changes hands; for two quotes to be comparable, both have to be given on the same term. An FOB price covers costs up to loading the goods onto the vessel at the port of shipment; sea freight and insurance are the buyer responsibility. A CIF price includes freight and insurance. The difference is not only price but responsibility: the term defines from which point the risk in the goods passes to whom.
What each term covers
FOB (Free On Board) means the seller bears all costs and risk up to loading the goods onto the vessel at the port of shipment. From the moment the goods are loaded, risk passes to the buyer; freight, insurance and costs at the destination port belong to the buyer.
CIF (Cost, Insurance and Freight) is the term where the seller also pays freight and insurance. But there is a point to watch: under CIF the seller pays the freight, yet risk still passes to the buyer at the port of shipment. Cost and risk do not change hands at the same point.
That distinction matters in practice: if goods bought CIF are damaged in transit, the risk sits with the buyer even though the seller paid the freight, and it is the buyer who claims on the insurance.
The one rule for comparison
When comparing two quotes, make sure both are given on the same Incoterm. Comparing an FOB price directly with a CIF price means treating freight and insurance as free. Quotes on different terms cannot be compared until they are converted to the same term.
Which suits which situation?
- If you have your own freight arrangement, FOB is advantageous: a buyer importing regularly with a contracted forwarder can usually arrange freight more favourably.
- If you are importing for the first time, CIF simplifies matters: arranging freight and insurance can be an extra burden in an unfamiliar market.
- If you consolidate shipments, FOB is necessary: combining goods from different suppliers into one container requires keeping freight under your own control.
- If you want to define insurance cover yourself, FOB is preferable; under CIF the cover the seller arranges may be at the minimum level.
Calculating the total cost
What actually matters to a buyer is not the delivery term but the total cost of the goods reaching your door. That includes: goods value, freight, insurance, destination port charges, customs duty and any other taxes, customs brokerage and inland transport.
Some of those lines belong to the seller and some to the buyer depending on the term; but all of them end up in the buyer total cost. So "which delivery term is cheaper" is the wrong question; the right one is "what will I pay in total".
The HS code of the product determines the customs duty calculation, and we cover that in a separate guide.
What to clarify when requesting a quote
- Delivery term and point: which Incoterm, which port or address.
- What the price includes: packing, loading, documents, certificates.
- Packing method: crate or pallet for breakers and attachments affects both freight and damage risk.
- Documents: invoice, packing list, certificate of origin and any other documents your region requires.
- Payment terms and lead time: these are separate from the Incoterm and should be clarified as well.
- At HKM we agree the most suitable delivery term, packing and lead time together with you according to the market you work in; send your request with the model code and destination country.