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 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.