FOB vs CIF vs EXW decides who arranges the truck, who clears customs, who pays the ocean freight — and, more importantly, who carries the risk if a container goes overboard. For fittings importers the terms look like simple price labels, but under Incoterms 2020 each one is a different division of labor. Here is the plain-language version.
Key takeaways
- Under EXW the seller’s only job is to make the goods available at their premises — the buyer loads the truck and handles export clearance, which is exactly why experienced importers often avoid EXW for exports.
- Under FOB the seller delivers the goods on board the buyer’s nominated vessel at the port of shipment and clears export; risk passes the moment the goods are on board, not when the ship arrives.
- Under CIF the seller also pays freight and minimum insurance to the destination port — but risk still passes on board at the port of shipment, so “CIF” is a cost arrangement, not a risk arrangement.
Incoterms comparison
| Term | Seller arranges & pays | Buyer arranges & pays | Risk transfers at | Typical use for fittings buyers |
|---|---|---|---|---|
| EXW | Makes goods available at named place | Loading, export clearance, all transport, import | When goods are placed at the buyer’s disposal | Domestic-style pickup; experienced buyers with origin agents |
| FOB | Inland haul to port, export clearance, loading on board | Ocean freight, insurance, import clearance | When goods are on board the vessel at the port of shipment | The default for importers with a forwarder |
| CFR | As FOB plus ocean freight to destination | Insurance, import clearance | When goods are on board the vessel at the port of shipment | Buyers who want seller-booked freight without insurance |
| CIF | As CFR plus minimum marine insurance (Institute Cargo Clauses C) | Import clearance and on-carriage | When goods are on board the vessel at the port of shipment | First-time buyers wanting one seller-handled price |
EXW: maximum buyer responsibility
Ex Works means the seller’s obligation ends when the goods are placed at your disposal at the named place — usually the factory gate. You load the collecting vehicle, you arrange everything from there, and critically, export clearance is yours: the seller has no obligation to clear the goods out of the country. For a foreign buyer with no presence at origin, that means hiring an agent just to satisfy export formalities — the ICC itself recommends EXW mainly for domestic shipments. The quoted EXW price looks cheapest and usually is not, once origin handling, export clearance and the coordination burden are priced in.
FOB: the importer’s default
Free On Board splits the job at the ship’s rail: the seller hauls the goods to the port of shipment, clears export customs and loads them on board your nominated vessel — from that loading moment, risk is yours, so nominate the vessel on time or loading delays become your risk. You arrange and pay the ocean freight, the insurance if you want it, and all import formalities at destination. For fittings buyers with a forwarder, FOB is the sweet spot: you control main carriage and insurance, the factory handles what it is best placed to handle, and prices compare cleanly between suppliers.
CIF and CFR: seller-booked freight, buyer-borne risk
Cost and Freight (CFR) adds the ocean freight to the seller’s account — the seller books and pays carriage to your destination port. Cost, Insurance and Freight (CIF) adds minimum marine insurance on top, on the buyer’s behalf. The trap for first-time buyers is assuming the risk travels with the cost: it does not. Under both CFR and CIF, risk passes when the goods are loaded on board at the port of shipment — the same instant as FOB. If the container is lost mid-ocean, the loss is the buyer’s; the seller merely contracted the freight. CIF’s insurance is also the minimum cover (Institute Cargo Clauses C), which buyers with real cargo values often top up. Use CFR or CIF when you want one seller-handled number and accept that freight may carry a markup; use FOB when you want to see the freight line yourself. Our delivery page covers how packing and documentation fit whichever term you choose.
Which term fits which buyer
- First import, no forwarder: CIF to your port — one price, seller handles origin and carriage, and you handle import clearance with a broker. Graduate to FOB once you have a forwarder relationship.
- Experienced importer with a forwarder: FOB, always. You see the freight, you control the insurance, and quotes compare cleanly.
- Buyer with an origin agent or consolidation plan: EXW can work, because the agent absorbs the export-clearance burden that makes EXW painful for everyone else.
- Whatever you choose: name the port and the term together — “FOB Ningbo,” “CIF Hamburg” — because the named place is half the definition.
FerruleX quotes EXW, FOB, CFR and CIF on request — send the RFQ checklist from how to write an RFQ with your preferred term and destination, and the quote states the term, the port and what is included. Request a factory quote.
FAQ
What is the real difference between FOB and CIF? Cost, not risk. Both pass risk when the goods are loaded on board at the port of shipment. CIF simply has the seller also pay the ocean freight and minimum insurance to your destination port — convenient, sometimes marked up, and no safer than FOB.
Why do experienced importers avoid EXW? Because export clearance is the buyer’s job under EXW, and a foreign buyer usually cannot perform it without an origin agent. EXW looks cheapest and becomes expensive once loading, clearance and coordination are priced.
If goods are damaged at sea on a CIF shipment, whose loss is it? The buyer’s — risk passed on board at the port of shipment, before the vessel sailed. That is why the CIF insurance exists, and why buyers with significant cargo values should check whether the minimum Institute Cargo Clauses C cover is enough or arrange their own top-up.
Does the named port matter? It is half the definition. “FOB” without a port, or “CIF” without a destination port, is an incomplete term — the Incoterm identifies both the rule and the named place where delivery and risk transfer occur.
Which Incoterm should a first-time fittings importer choose? CIF to your nearest port, with a destination customs broker handling import clearance. It keeps origin logistics in the seller’s hands while you learn the import side. Move to FOB once you have a forwarder you trust.
