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| Cost | In the FOB price | Added in the CIF price |
|---|---|---|
| The ore, at the seller's price | Yes | Yes |
| Inland transport and port handling to the ship's side | Yes, seller's cost | Yes |
| Export clearance and licences | Yes, seller's cost | Yes |
| Loading on board at the load port | Yes, seller's cost | Yes |
| Sea freight to the destination port | No, buyer pays the carrier | Yes, seller pays |
| Marine insurance | No, buyer's choice | Yes, minimum cover for the buyer's benefit |
| Other costs the seller builds into its price | No | If the seller includes them, for example inspection or financing |
| Unloading at the destination port | No | No, unless the freight contract includes it |
| Import duties, taxes and inland delivery | No | No |
Based on the usual allocation under Incoterms 2020. The "other costs" row is not set by the Incoterm: a seller can price in whatever it chooses, so ask what a CIF price contains.
| Item | Per tonne |
|---|---|
| FOB price | $170.00 |
| + Sea freight | $35.00 |
| + Other seller costs | $0.00 |
| + Insurance premium (0.15% of 110% of the CIF value) | $0.34 |
| = CIF price | $205.34 |
Illustrative rates, not quotes. The premium is charged on the CIF value, so it is solved together with the price. Use the calculator with a current freight quote.
The difference in one sentence
FOB (free on board) means the seller delivers the ore on board the ship the buyer has arranged, and the buyer pays for the main carriage. CIF (cost, insurance and freight) means the seller arranges and pays for the sea freight to the destination port and buys minimum insurance. In both, the risk of loss or damage passes to the buyer once the cargo is on board at the port of shipment.
How to estimate a CIF price from a FOB price
Add the sea freight, any other costs the seller carries to the destination port, and the insurance premium. Marine insurance for CIF is commonly written on 110% of the contract value, and the minimum cover under Incoterms 2020 is the Institute Cargo Clauses (C). Because the premium is a percentage of the CIF value, CIF equals the FOB price plus freight and other costs, divided by one minus the insured percentage times the premium rate.
The freight is the big number and the one that moves. It depends on the route, the size of ship, the fuel price and the state of the freight market, so use a current quote from a broker for the route from your loading port to the destination port instead of a rule of thumb. The FOB to CIF calculator on this site does the arithmetic and shows each cost.
What a CIF price does not include
Unloading at the destination port is normally for the buyer unless the freight contract includes it. Import duties, taxes and inland transport from the port are also for the buyer. And because the insurance is minimum cover, a buyer may want broader cover at its own cost.
Which to choose
- A buyer with its own shipping desk and cargo insurance often prefers FOB, because it controls the ship, the timing and the cover.
- A buyer who wants one delivered price, or wants to compare offers against a CIF benchmark such as high-grade manganese ore CIF Tianjin, may prefer CIF.
- A seller offering CIF takes the freight market risk between quoting and fixing the ship, so it should price in a margin or fix the freight when it agrees the sale.
- Whatever the rule, compare offers on the same basis by converting them to FOB or to CIF, and write the rule, the port and the Incoterms edition in the contract.
Related calculators
Frequently asked questions
What is the difference between FOB and CIF?
Under FOB the buyer arranges and pays for the ship and any insurance. Under CIF the seller pays the sea freight to the destination port and buys minimum insurance for the buyer. Risk passes at the load port in both.
What costs are included in a CIF price?
The FOB price, which covers the ore, inland transport to the port, export clearance and loading on board, plus sea freight and minimum marine insurance. A seller may add other costs of its own.
How do I estimate a CIF price from FOB?
Add the sea freight, any other seller costs and the insurance premium. The insurance premium is charged on the CIF value, so the calculation solves for it together with the price.
Who pays unloading costs under CIF?
Normally the buyer, unless the contract of carriage includes unloading. Check the freight contract and the sales contract.
Is the buyer or the seller responsible for the cargo at sea under CIF?
The buyer. Risk passes when the cargo is on board at the port of shipment, and the seller's insurance is for the buyer's benefit.
Sources
- ICC: Incoterms 2020 introduction
- Project Materials: Incoterms 2020 types and risks
- Vero Marine: common Incoterms 2020 and their meanings
Specifications published by index providers are revised over time. Where a figure comes from a pricing notice, confirm the version currently in force with the publisher before you use it in a contract. Corrections are welcome.