Difference Between CIF and FOB?

CIF and FOB are commonly used INCOTERM agreements used for shipping and transportation.

CIF and FOB are commonly used INCOTERM agreements. INCOTERM represents an agreement that governs the responsibility of sellers and buyers while shipping in international trade. The purpose of this system is to help orderly international trade by providing agreement structure that is easily recognized across the countries. CIF and FOB mention which party is responsible for goods in transit, what insurance is needed and who make payments of freight charges.


CIF stands for Cost, Insurance and Freight, when this shipping agreement is used, the seller has responsibility for the price of the cargo in transit, providing minimum insurance and payment of the freight charges to deliver the cargo to the specific destination selected by the buyer. From the point of the final delivery point at the destination, the buyer considers responsibility for charges of unloading and any further shipping costs.


Free On Board or FOB type of shipping agreement, the shipper or seller manages for cargo to be shipped to a designated point of origin. Normally point of origin is port because FOB and other INCOTERM agreements are mainly planned for marine shipping. However, FOB agreements are also used for road and air shipments. Delivery is fulfilled when the seller releases the cargo to the buyer.