| Rule | Who arranges the ship | Insurance | Risk passes to the buyer | Where it appears in ore trade |
|---|---|---|---|---|
| FOB | Buyer | Buyer, if it chooses to insure | On board at the load port | Producer and origin offers |
| CFR | Seller, to the destination port | Buyer, if it chooses to insure | On board at the load port | Delivered offers without insurance |
| CIF | Seller, to the destination port | Seller buys minimum cover for the buyer | On board at the load port | Benchmarks such as high-grade manganese ore CIF Tianjin |
Summarised from the ICC's introduction to Incoterms 2020 and secondary guides. Read the rule text in the ICC publication before relying on a detail, and name the rule, the port and the Incoterms edition in the contract.
Swipe sideways to see all columns →
| Cost or task | FOB | CIF |
|---|---|---|
| Export clearance and licences | Seller | Seller |
| Loading the cargo on board at the load port | Seller | Seller |
| Sea freight to the destination port | Buyer | Seller |
| Marine insurance | Buyer, if it chooses to insure | Seller buys minimum cover for the buyer |
| Risk of loss in transit | Buyer, from on board at the load port | Buyer, from on board at the load port |
| Unloading at the destination port | Buyer | Buyer, unless the freight contract includes it |
| Import clearance, duties and taxes | Buyer | Buyer |
| Delays at the load or discharge port (demurrage) | Set in the sales contract | Set in the sales contract |
A guide to the usual allocation under Incoterms 2020. The contract can vary it, so check the wording.
What an Incoterm does and does not do
An Incoterm allocates costs, risks and tasks between buyer and seller for delivery. It does not set the price, say when title passes, or define quality. Those belong in the sales contract, together with the assay, sampling and payment terms.
FOB, CFR and CIF are for sea and inland waterway transport. Several guides warn against using them for containerised cargo, where rules for any mode of transport apply instead. Bulk ore normally ships in a vessel's hold, so the sea rules fit, but ore sold in containers should use a different rule.
Why risk passes at loading, even when the seller pays the freight
Under CFR and CIF the seller pays for the sea freight to the destination port, but the risk of loss or damage in transit still passes to the buyer once the cargo is on board at the port of shipment. This catches buyers out: a CIF contract does not make the seller responsible for the cargo at sea. It means the seller must buy insurance for the buyer's benefit.
That is why insurance cover matters. Under Incoterms 2020, CIF requires only minimum cover on Institute Cargo Clauses (C), a named-perils cover that is narrower than all-risks cover, and sources commonly describe the insured amount as 110% of the contract value. The parties can agree broader cover in the contract.
Converting between CIF and FOB prices
Benchmarks for ore are often quoted CIF a Chinese port, while a mine sells FOB at its load port. To compare them, work back from the CIF price: FOB equals CIF minus the sea freight and the insurance premium. A seller quoting FOB at a lower number may be offering the same value as a CIF benchmark once freight is taken off.
The FOB to CIF and CIF to FOB calculator on this site does the arithmetic from the freight rate and insurance rate you enter, and itemises the costs. Freight rates and premiums change with the market, so use current quotes. The article on FOB vs CIF for bulk ore walks through the costs in each price.
Choosing a rule for an ore contract
A buyer with its own shipping desk and cargo insurance programme often prefers FOB, because it controls the ship, the timing and the insurance. A buyer without that capability, or one that wants a single delivered price, tends to prefer CFR or CIF. A seller should check that it can arrange a ship and, for CIF, insurance that meets the contract before it offers delivered terms.
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 arranges and pays for the ship to the destination port and buys minimum insurance for the buyer. In both, risk passes when the cargo is on board at the load port.
What is the difference between CFR and CIF?
Insurance. CIF includes minimum insurance paid by the seller, while under CFR the seller pays freight only and the buyer insures for itself.
Who bears the risk at sea under CIF?
The buyer. Risk passes to the buyer once the cargo is on board at the port of shipment, and the seller's insurance is for the buyer's benefit.
What insurance does CIF require under Incoterms 2020?
Minimum cover on the Institute Cargo Clauses (C), which is narrower than all-risks cover. The parties can agree broader cover in the contract.
Can FOB, CFR and CIF be used for containers?
They are meant for sea and inland waterway transport. For containerised cargo, rules that apply to any mode of transport are generally recommended.
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.