CIF and FOB are two important conditions mentioned in Incoterms 2020, which are effective as of January 1, 2020. There are several differences between these two conditions.
1. In terms of contract wording
- FOB condition is written as: FOB [designated port of delivery] Incoterms 2020.
- CIF condition is written as: CIF [designated port of delivery] Incoterms 2020.
2. Responsibilities of the seller
2.1. FOB condition
The seller is responsible for delivering the goods safely and cleared for export onto the designated vessel at the named port of shipment as instructed by the buyer. To do this, the seller needs to perform the following tasks: produce and package the goods according to the agreed terms in the contract, transport the goods from their warehouse to the designated port of shipment, complete export customs formalities, deliver the goods onto the vessel at the buyer’s nominated port, and prepare other relevant documents as requested by the buyer.
2.2. CIF condition
The seller is responsible for delivering the goods cleared for export to the named port of destination as instructed by the buyer. Specifically, the seller will perform the following tasks: produce and package the goods according to the agreed terms in the contract, transport the goods from their warehouse to the port of shipment, complete export customs formalities, sign the international transport contract to transport the goods from the port of shipment to the named port of destination, and be responsible for arranging transportation insurance for the benefit of the buyer. Under CIF, Incoterms 2020, the seller is responsible for purchasing the highest level of transport insurance for the benefit of the buyer.
3. Responsibilities of the buyer
3.1. FOB condition
The buyer takes delivery of the goods on board the vessel at the named port of shipment, assumes responsibility for signing the international transport contract to transport the goods from the port of shipment to the port of destination, completes import customs formalities, arranges domestic transportation of the goods from the port of destination to their own warehouse, handles storage and distribution of the goods, and can optionally purchase insurance for the goods if they feel there is a risk during transportation (both international and domestic).
3.2. CIF condition
The buyer is responsible for unloading the goods from the vessel at the named port of destination, completing import customs formalities, transporting the goods from the port of destination to their own warehouse, handling storage and distribution of the goods, and making payment for the goods to the suppliers. The buyer is advised to request the seller to arrange the highest level of insurance coverage, but if they are not confident about the safety of the goods, they can proactively purchase additional insurance for the international transportation route.
4. Regarding the transfer of risk
4.1. FOB condition
The seller bears all risks of loss or damage to the goods until the goods are successfully delivered on board the vessel at the port of shipment, except for any loss or damage that occurred before that point. The buyer assumes the risk once the goods are delivered on board the vessel.
4.2. CIF condition
The risk transfers from the seller to the buyer as soon as the goods are successfully delivered on board the vessel.
