FOB vs CIF | Difference between FOB and CIF

The following difference exists between FOB and CIF.

FOB vs CIF

(Image: FOB vs CIF)

Meaning: FOB means free on board. The price includes all the expenses incurred until goods are actually loaded on board the ship at port of shipment. CIF stands for cost, insurance and freight. The seller meets cost of goods, freight and marine insurance.

Costs:  FOB covers those costs such as ex-factory costs, packing charges, inland transportation charges, documentation and loading charges. CIF price includes free on board and charges of Freight and marine insurance.

Shipping space: In FOB, the buyer is liable to book at his own expenses necessary space on board. He informs the seller about the name of the ship, loading, berth etc. In CIF, the seller books shipping space on board acquired for the transportation of the goods.

Risks: In FOB, the buyer bears all the risks of loss or damage to the goods from the time the goods have been placed on the board. In CIF, the seller is liable to meet all costs and risks of loss from the time the goods are placed on the board till they reach the named destination.

Preference: The obligation of the seller is limited and the risks of loss are transferred to the
buyer. So, the seller prefers FOB price. Since the seller books space on the board, pays freight and insurance, the responsibility of the buyer is limited in CIF. So buyer may prefer CIF.

Lien on goods: In FOB, the seller has no right of lien on the goods and the right of stoppage in transit, The shipping company is obliged to buyer. But in CIF, the seller has right of lien on goods as well as the right of stoppage in transit. Because the seller has contracted the shipping company.

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