Delivery terms determine who pays for freight and insurance, where risk transfers and which documents each party must produce. A practical guide for buyers and suppliers.
Incoterms are the internationally recognised rules that define the responsibilities of buyers and sellers for the delivery of goods. In bulk commodity trade, three terms dominate: FOB, CFR and CIF.
FOB (Free On Board)
Under FOB the seller delivers the goods on board the vessel nominated by the buyer at the named port of loading. Risk transfers once the goods are on board. The buyer arranges and pays for the main carriage and insurance. FOB suits buyers with their own chartering capability or long-term freight arrangements.
CFR (Cost and Freight)
Under CFR the seller arranges and pays for carriage to the named port of destination, but risk still transfers to the buyer once the goods are on board at the loading port. Insurance is the buyer's responsibility.
CIF (Cost, Insurance and Freight)
CIF is CFR plus insurance: the seller must also procure minimum cover for the buyer's risk during the voyage. CIF is common where buyers prefer a single landed price to the destination port.
Choosing the right basis
The right term depends on freight market conditions, the buyer's logistics capability, the payment mechanism and the documentation requirements of the destination market. Our trade desk can structure the same cargo on more than one basis so that the buyer can compare total landed cost.
This article is for general information only and does not constitute legal or commercial advice.
Articles are provided for general information only and do not constitute an offer, financial or investment advice, or a guarantee of market outcomes.