FOB or CIF: Which one is better for importers?

Incoterms 2010 defines 11 delivery terms, 4 of which designed to be used in only sea shipments, whereas 7 of which could be used with any mode of transport.

The most frequently used two Incoterms, FOB and CIF, are restricted to be used in sea shipment only. They are so popular that, their usage most probably surpass remaining 9 Incoterms' usage.

But, the main question remains: Which one is better when importing goods into one country? FOB or CIF.

On this article, I will try to explain whether FOB or CIF is a better option for importers.

FOB | CIF | Incoterms | Better | Importers | Picture

What are the differences between FAS and FOB Incoterms?

Today I am going to write about the differences two major incoterms, FAS and FOB, which have been in use since the presentation of international commercial terms by ICC in year 1923.

First Incoterms: A Trade Terms Committee with the assistance of the ICC National Committees developed the first six rules in 1923: FOB, FAS, FOT, FOR, Free Delivered CIF and C&F, which were the precursor of what would later be known as the Incoterms rules.



What are the differences between DAP and DDP Incoterms?

Delivered at Place (DAP) and Delivered Duty Paid (DDP) are two incoterms that needs to be used when exporter delivers goods to importer not in his own country but in most cases in a place that is specified within the importer's country.

Although both of these two incoterms have many common characteristics, there are some meaningful differences exist between DAP Incoterms 2010 and DDP Incoterms 2010. 

Today I want to mention the differences between DAP Incoterms and DDP Incoterms according to latest ICC rules of international commercial terms.


What are the differences between DAT and DAP Incoterms?

DAT and DAP are two new international commercial terms, which have been introduced to the foreign trade world with the publication of Incoterms 2010 rules. 

Before January 1, 2011, which is the effectiveness date of Incoterms 2010, there were no incoterms called DAT or DAP.

Today I want to mention the differences between DAT Incoterms and DAP Incoterms according to latest ICC rules of international commercial terms.
 



What are the differences between CIF and CIP Incoterms?

So far on this website, I have explained the differences between EXW and FCA as per Incoterms 2010 rules, the differences between FOB and FCA as per Incoterms 2010 and the differences between CIF and FOB

Today I want to mention the differences between CIF Incoterms and CIP Incoterms according to latest ICC rules of international commercial terms.

CIF and CIP are the only incoterms, which regulates the insurance coverage of the transaction. 

Under these two incoterms, exporters obligated to supply an insurance policy to importers.


What are the differences between FOB and CFR?

Previously on this website, I have explained the differences between EXW & FCA, FOB & FCA and FOB & CIF.

Today I would like to talk about the differences between FOB Incoterms and CFR Incoterms.

Firstly, I need to make the definitions on each incoterms as follows.

Definition of FOB according to Incoterms 2010 rules

FOB means Free on Board. According to incoterms 2010 rules, an exporter delivers the goods to the importer once the goods shipped on board a named vessel at the port of loading.

Exporter neither arranges the transportation from port of loading to port of discharge, nor pays for the freight cost under FOB terms.


Additionally exporter has no obligation against the importer in regards to marine insurance.

What are the differences between CIF and FOB?

So far on advancedontrade.com, I have explained the differences between EXW and FCA as per Incoterms 2010 rules and the differences between FOB and FCA as per Incoterms 2010 .

Today I want to mention the differences between CIF Incoterms and FOB Incoterms according to latest ICC rules of international commercial terms.

First of all let me make the definitions of both trade terms according to current incoterms rules:
  • Definition of FOB according to Incoterms 2010: “Free on Board” means that the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered.
  • Definition of CIF according to Incoterms 2010: “Cost, Insurance and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered.

Once you read above definitions, which are taken from Incoterms 2010, you should be amazed like myself, as both definitions are the same. No I did not make any mistake. These are the real definitions of FOB and CIF from Incoterms 2010.


Is it possible to use FOB incoterms with land and or air shipments?

The aim of the international commercial terms, known as incoterms, is to create a set of international standard rules for the application of the most commonly used trade terms in foreign trade.

Incoterms can only achieve its goal if it could reduce or eliminate the uncertainties of different interpretations of such terms in different countries.

ICC, International Chamber of Commerce, published latest version of international trade terms rules, which is known as Incoterms 2010. 

Incoterms 2010 rules define 11 different trade terms.

FOB, Free on Board, trade term is one of the most frequently used incoterms along with CIF and Ex Works. 

As a result every exporter or importer must understand these trade terms very well.


Is it possible to use CIF incoterms with air shipments?

Incoterms 2010 is the newest set of rules, which regulates international trade terms. 

There are 11 different trade terms defined in Incoterms 2010 rules. 

Each trade term defined in incoterms 2010 rule have a unique characteristics. 

As a result an exporter or importer must understand the differences between trade terms in detail.


What does CIF trade terms mean according to Incoterms 2010 rules and what are the key characteristics of CIF incoterms?

CIF means "Cost, Insurance and Freight" according to Incoterms 2010 rules. “Cost, Insurance and Freight” means that the exporter delivers the goods on board the vessel at the port of loading as determined by the sales contract.

Alternatively exporter can procures the goods already shipped on board a vessel as per CIF trade terms. 

This is a common practice in crude oil market.