CIF vs. FOB: What They Mean and How They Differ

CIF and FOB are shipping terms that define who pays for transportation and who bears the risk for the cargo at each stage: the seller or the buyer.

If you work in logistics, procurement, or international trade, you’ve probably come across these terms. But they’re used in two different ways, and mixing them up can lead to unexpected costs and disputes:

• in international trade, CIF and FOB are Incoterms, global rules with precise definitions;
• in domestic shipping, in markets like Brazil, the same names indicate who arranges and pays for freight, including on invoices.

In this article, we explain both uses, the differences between CIF and FOB, and what to consider when choosing.

What are Incoterms?

Incoterms (International Commercial Terms) are rules published by the International Chamber of Commerce (ICC) that define the obligations of sellers and buyers in international sales contracts. The current version is Incoterms 2020, with 11 terms.

Among other things, they define:

• when the goods are delivered;
• who pays each transportation cost;
• when the risk of loss or damage passes from seller to buyer.

CIF and FOB belong to the group of terms that apply only to sea and inland waterway transport. For other modes, such as trucking or containerized multimodal shipments, there are equivalent terms like FCA, CPT, and CIP.

Incoterms apply only when they’re referenced in the sales contract.

What is FOB under Incoterms?

FOB stands for Free On Board.

Under FOB, the seller delivers the goods on board the vessel named by the buyer at the agreed port of shipment. From that point on, the buyer bears the risk and all costs: ocean freight, insurance, unloading, and everything after.

It’s a common choice for buyers who have their own contracts with carriers and freight forwarders and prefer to control the main leg of transportation.

What is CIF under Incoterms?

CIF stands for Cost, Insurance and Freight.

Under CIF, the seller arranges and pays for freight and insurance to the agreed port of destination. But note: risk passes to the buyer as soon as the goods are loaded on board the vessel, at the port of origin. If the cargo is damaged in transit, it’s the buyer who files the insurance claim.

Under Incoterms 2020, CIF requires only minimum insurance coverage (Clause C of the Institute Cargo Clauses). If the buyer wants broader coverage, it must be written into the contract.

CIF and FOB in Brazil’s domestic freight

In Brazil, CIF and FOB are also used for domestic road freight, but with a simpler meaning tied to who arranges and pays for shipping:

• CIF freight: the shipper (seller) arranges and pays for freight to the destination;
• FOB freight: the consignee (buyer) arranges and pays for freight, either picking up the goods or sending a carrier.

An FOB example: a computer manufacturer buys electronic components and hires its own carrier to collect them from the supplier. Because the cargo is high-value and has a single destination, it prefers to control the shipment.

A CIF example: when you buy online, the store arranges and pays for delivery to your address, usually building that cost into the price or the shipping fee.

That’s why CIF tends to be more common in consumer sales (B2C) and FOB in business-to-business purchases (B2B), though that’s a trend, not a rule.

On Brazil’s electronic invoice (NF-e), the freight arrangement is always reported in a dedicated field with six options, including “0” for CIF and “1” for FOB. Because tax rules vary by country and Brazil is in the middle of a tax reform transition, always check with your accounting team.

What’s the difference between CIF and FOB?

	FOB	CIF
Under Incoterms: who pays main freight	Buyer	Seller
Under Incoterms: who pays insurance	Buyer, if they choose to buy it	Seller (minimum coverage)
Under Incoterms: when risk passes to the buyer	With goods on board, at the port of origin	With goods on board, at the port of origin
In Brazil’s domestic freight: who arranges shipping	Consignee	Shipper
Most common use	B2B purchases, high-value cargo	Consumer sales, e-commerce

Note that under Incoterms, risk transfers at the same point for both terms. The difference lies in who pays for and organizes the main transportation and the insurance.

CIF, FOB, and Brazil’s mandatory toll voucher

For road freight in Brazil, the freight arrangement also determines who must comply with the mandatory toll voucher (vale-pedágio obrigatório, or VPO). Under ANTT Resolution No. 6,024/2023, whoever hires the transportation must advance the trip’s toll costs to the carrier, electronically and separately from the freight payment.

In practice:

• with CIF freight, this obligation usually falls on the shipper;
• with FOB freight, it falls on the consignee who hired the carrier.

Calculate freight costs before you choose

The main difference between CIF and FOB is how much responsibility the buyer and seller take on. To choose the right arrangement, you need to know what transportation costs and who will pay for each part of it.

Maplink Cloud’s Platform helps you run the numbers:

• the Freight API calculates the freight cost for a route [validate description];
• the Toll API calculates tolls by vehicle type and follows the mandatory toll voucher methodology;
• the Trip API and Distance Matrix API calculate routes, distances, and travel times.

Maplink Cloud has spent more than 25 years bringing together geolocation, cloud, and data intelligence for companies across Latin America. As a Premier Partner for Google Cloud and Google Maps Platform, we integrate these solutions with your TMS, ERP, or WMS through Maplink Cloud Managed Services.

We support companies that lead their markets, including Mercado Libre, Despegar, Gol Linhas Aéreas, Nestlé, and BRF. [validate client list]

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