FOB and CIF are the sea freight terms Pakistani importers meet most often. They look similar on a quotation, yet they decide who books the ship and who pays for insurance. The wrong choice can quietly raise your landed cost.
What FOB and CIF Actually Mean
FOB (Free On Board): the seller delivers the goods on board the vessel at the port of shipment and clears them for export. From that moment you, the buyer, pay the ocean freight and arrange insurance.
CIF (Cost, Insurance and Freight): the seller books the ship and buys minimum insurance up to the destination port, for example Karachi.
The Risk Point Is the Same
Under both terms, risk passes to the buyer once the cargo is on board at the origin port. Under CIF the seller pays for the voyage, but you still carry the risk. The seller's insurance is only minimum cover (Institute Cargo Clauses C, usually 110% of invoice value), so many buyers add their own policy.
Practical Example: Shanghai to Karachi
Illustrative figures: a 20 ft container of goods invoiced at USD 20,000 FOB Shanghai. Freight is USD 1,800 and insurance at 0.3% of 110% of value is USD 66.
- FOB: you pay USD 20,000 to the supplier, then USD 1,866 for freight and insurance through your forwarder.
- CIF: the supplier quotes about USD 21,866, with freight and insurance inside the price.
The totals match, but under FOB you can compare forwarder rates and control the booking, schedule and claims. Customs duty is assessed on the CIF value either way.
Common Mistakes
- Assuming CIF means the seller is responsible for damage during the voyage.
- Accepting the seller's minimum insurance without checking what it covers.
- Forgetting destination charges, which neither term includes.
Expert Tips
- Get a freight quote before accepting any CIF price, to see what is built into it.
- Prefer FOB when you ship regularly and want control over carriers and dates.
- Name the port and "Incoterms 2020" on the contract.
- Match the commercial invoice, packing list and bill of lading to the agreed term.
FAQ
Which is cheaper, FOB or CIF?
Neither automatically. FOB wins when your forwarder's rates beat the supplier's freight mark-up.
Who pays for insurance under FOB?
The buyer. The seller has no duty to insure once the goods are on board.
Can FOB or CIF be used for air freight?
No. Use FCA or CPT for air and multimodal shipments.
Does CIF include customs clearance in Pakistan?
No. Import duties, taxes and clearance at destination remain with the buyer.
Conclusion
FOB gives you control, CIF gives you convenience, and the risk point is identical. Pioneer Express can compare both options for your next shipment, so request a quote and we will show you the true landed cost.
