FOB, CFR or CIF for your first container from India

Three letters on a proforma invoice decide who books the ship, who pays for it, who insures it, and who argues with the carrier when the box sits at the quay. FOB, CFR and CIF are the terms most Indian exporters quote by default. Here is what each one actually moves, which tends to be cheaper, and what changes when something goes wrong.

What FOB, CFR and CIF actually move

All three are maritime rules, meant for port-to-port shipments, and in all three the seller handles export clearance in India.

• FOB (Free on Board, named port of shipment). The seller delivers the goods on board the vessel at the agreed Indian port. Risk of loss or damage passes to the buyer at that point, and the seller completes the export formalities. You contract and pay for the sea freight.
• CFR (Cost and Freight, named port of destination). The seller contracts and pays for carriage to the destination port you name.
• CIF (Cost, Insurance and Freight, named port of destination). CFR plus a contract of insurance taken out by the seller for your benefit.

The trap in CFR and CIF is in the name. These are "C" rules, and under the ICC's own explanation the seller delivers — and risk passes — when the goods are loaded on board at the export port, even though the term names a destination port. "CIF Antwerp" delivers at Mundra or Nhava Sheva. The destination in the term is a cost point, not a risk point. If the vessel is lost mid-ocean, that is your loss under all three rules, not ours.

Which one is normally cheaper

There is no fixed answer, and anyone who gives you one is guessing. The ICC's checklist puts it as an economic question: give the larger share of the transport duties to whichever party can obtain the cheaper or more efficient transport.

In practice that means:

• If you already have a contracted rate with a carrier or NVOCC, or a freight forwarder who consolidates your other inbound cargo, FOB usually wins. You see the freight rate directly instead of inside a goods price.
• If this is a first container and you have no freight agreement, CFR is often simpler. You get one number, and one party to chase.

Compare like for like, or the comparison is meaningless. An FOB price and a CFR price differ by more than ocean freight: origin terminal handling, bill of lading and documentation fees, seal and haulage charges all have to sit somewhere. Ask in writing which origin charges are inside the FOB price and which your nominated agent will be billed for. On CFR and CIF, ask which carrier, and how many days of free time at destination — the carrier is chosen by the seller, but the demurrage and detention are yours.

Switching to FOB will not cut your duty

A common assumption is that buying FOB lowers the customs value. It does not, in the EU or the UK.

Under Article 71(1)(e) of the Union Customs Code, Regulation (EU) No 952/2013, the price paid is supplemented by the cost of transport and insurance, plus loading and handling charges, up to the place where the goods are brought into the customs territory of the Union. UK guidance says the same: all transport costs including loading and handling up to the place of introduction are included, insurance is treated as part of those transport costs, and no addition is required where the delivery terms are CIF or post-CIF — because the freight is already inside the price. Inland transport after the border can be deducted only if it is charged separately and can be distinguished.

So CIF puts the freight in the invoice; FOB makes you add it on the declaration. The duty base is the same. Choose on control and cost, not on duty.

For a container, the ICC says use FCA, CPT or CIP

This is the part most buyers skip. FOB, CFR and CIF were written for cargo loaded directly on board. A container is handed to the terminal days before the vessel loads, so under FOB the seller carries risk through a period when the box is already out of its hands and not yet on board. The ICC's Incoterms 2020 checklist is explicit: if the goods travel in containers or multimodally, or delivery is to an inland or port terminal, choose FCA; and for the carriage-paid equivalents, CPT where you do not want insurance in the price and CIP where you do. The checklist also notes that FCA under Incoterms 2020 offers a way to bridge the on-board transport document that letters of credit usually demand.

If your bank, your insurer or your internal system needs FOB, use FOB — but know you are using a rule the ICC does not recommend for your cargo, and say so in the contract if it matters.

What changes when something goes wrong

Insurance level. Under FOB and CFR nobody insures the goods for you. If you have not bought cover, you are uninsured from the moment the box is on board. Under CIF the seller must insure, but at minimum cover only. The contrast is clear in the ICC material on CIP, where the seller must insure under Institute Cargo Clauses (A), maximum cover, for at least 110% of the contract price, with the policy in the buyer's favour. CIF carries no such all-risk requirement. If you want wider cover, agree it expressly in the contract — otherwise you get the minimum.

Your own country's rules. The ICC's January 2025 note on national regulatory barriers lists countries that restrict whether a foreign party may issue transport insurance, which can get in the way of CIF, where a foreign seller insures for the buyer's benefit. Check before you ask for CIF.

Rejection at destination. The Incoterm does not decide who pays when a consignment fails a border check. Risk transfer and conformity of the goods are separate questions, settled by your contract, your specification and the test results. That is argued on the certificate of analysis, not on three letters — see how we test and document each lot.

A practical note

Write the rule, the named port and the version: "CFR Hamburg, Incoterms 2020", not "CFR Hamburg". Add container type, free days expected, and who bears origin charges. Our standard quotes are FOB, CFR or CIF from major Indian ports; if your contract or your bank needs a different rule, raise it at enquiry stage rather than after the proforma is signed. The steps between quotation and delivery are set out on our export process page, the catalogue is at products, and specifics go through the enquiry form.

Sources

• FOB: seller delivers and risk passes once goods are loaded on board at the named port of shipment; seller completes export formalities; FOB is maritime/inland waterway only — academy.iccwbo.org
• C rules (CFR, CIF, CPT, CIP) name a destination but delivery and risk transfer occur at the export port when goods are loaded on board — academy.iccwbo.org
• CIP requires Institute Cargo Clauses (A) maximum cover, at least 110% of the contract price, policy in favour of the buyer; extra cover must be specified in the sales contract — academy.iccwbo.org
• ICC guidance to choose FCA for containerised or multimodal shipments and terminal delivery; CPT/CIP as containerised C rules; CFR without insurance, CIF with; FCA's bridge to on-board documents required by letters of credit; the economic argument on allocating transport duties — library.iccwbo.org
• ICC January 2025 note: some countries restrict whether a foreign entity may issue transport insurance, which can stand in the way of using CIF, where the foreign seller insures for the buyer's benefit — academy.iccwbo.org
• Union Customs Code Article 71(1)(e): cost of transport and insurance, and loading and handling charges, up to the place where goods are brought into the customs territory of the Union are added to the transaction value — eur-lex.europa.eu
• UK: all transport, loading and handling costs up to the place of introduction included in customs value; insurance forms part of transport costs; no addition required where terms are CIF or post-CIF; UK inland costs deductible only if charged separately and distinguishable — gov.uk