FOB vs CIF: Which Sea Freight Term to Buy On

FOB and CIF are the two terms you will most often be quoted when you buy green coffee, and the difference between them decides who arranges the shipping, who pays for it, and where your risk begins. Both are defined under Incoterms 2020, the standard international trade terms published by the International Chamber of Commerce. Both are sea freight terms, used for coffee moving by ocean in containers. This guide explains what each covers and how to choose.

What FOB covers

FOB stands for Free On Board. Under FOB, the seller delivers the coffee by loading it on board the vessel at the named origin port. The seller handles everything up to that point: the coffee, export packing, getting it to the port, and export clearance. From the moment the coffee is on board, you take over. You arrange and pay for the ocean freight, the cargo insurance, and everything onward to your door.

FOB suits a buyer who wants to control the shipping. If you have your own freight relationships, you can often book ocean freight on better terms than the seller would pass through, and you choose the carrier and the routing.

What CIF covers

CIF stands for Cost, Insurance and Freight. Under CIF, the seller does more. The seller loads the coffee on board at the origin port, and also arranges and pays for the ocean freight to the named destination port and for cargo insurance covering the sea leg. You receive the coffee at destination with the freight already booked and paid and an insurance policy already in place.

CIF suits a buyer who wants fewer moving parts. You are quoted one figure that gets the coffee to your destination port, and you do not have to arrange the sea freight or the insurance yourself. Many first time importers prefer CIF for that reason.

The subtlety that matters most

Here is the point that catches buyers out, and it is the same under both terms. Risk transfers to you when the coffee is loaded on board the vessel at the origin port. That is true for FOB and it is true for CIF.

Under CIF the seller pays for the freight and the insurance, but that does not mean the seller carries the risk across the sea. It means the seller has bought you a freight booking and an insurance policy. The in transit risk is yours from the moment the coffee is loaded on board the vessel at origin. If the cargo is damaged or lost on the voyage, it is your loss to claim, and you claim on the insurance the seller arranged in your interest.

Two things follow from this. First, read who the insurance protects and make sure you can claim under it. Second, know that CIF insurance is minimum cover unless you agree otherwise. The default level required under CIF is the minimum, the Institute Cargo Clauses (C), which is a limited named perils cover. For high value or fragile cargo, that minimum may not be enough, and you can agree a higher level of cover or arrange your own. Do not assume CIF means you are fully covered. It means you are covered to the minimum unless the contract says more.

What neither term includes

Neither FOB nor CIF gets the coffee to your warehouse. Both stop at the sea leg. Once the container reaches the destination port, the destination charges, the import duty, any taxes, customs clearance, and the last mile to your premises are yours to handle and pay. Budget for these from the start, because a CIF price to the destination port is not a delivered price. The gap between the port and your door is real money.

How to choose

A buyer with freight relationships and steady volume often leans FOB, to control cost and carrier. A buyer who wants simplicity, or who is early in building an import operation, often leans CIF. Neither is better in the abstract. The right term depends on whether the control is worth more to you than the simplicity, and on whether you can move freight more cheaply than the seller can.

How IndoCasa quotes

We quote either FOB or CIF, whichever suits how you want to operate. On FOB we deliver the coffee loaded at the origin port and you take the sea leg from there. On CIF we arrange and pay the freight and the insurance to your destination port. Either way we control the origin side, build the lot, arrange the analysis and inspection, and assemble the document set, so the coffee and the paperwork leave Indonesia clean. The Logistics page covers the export path in detail.

To get a price on either basis, Contact Us. To see where the term fits the whole purchase, see How to Import Green Coffee, and to check a lot before you accept it, see How to Read a Certificate of Analysis.