FOB vs CIF vs EXW: which Incoterm should an exporter use?
Under EXW the buyer does almost everything, including export clearance. Under FOB the seller clears export and loads the goods on board; risk passes there and the buyer pays sea freight. Under CIF the seller also pays sea freight and minimum insurance to the destination port, but risk still passes on board at the origin port.
The short comparison
| Responsibility | EXW | FOB | CIF |
|---|---|---|---|
| Transport mode | Any | Sea and inland waterway | Sea and inland waterway |
| Export clearance | Buyer | Seller | Seller |
| Main carriage paid by | Buyer | Buyer | Seller |
| Insurance | No obligation | No obligation | Seller, ICC (C) minimum, 110 % |
| Risk passes | At seller's premises | On board vessel, origin port | On board vessel, origin port |
| Import clearance and duties | Buyer | Buyer | Buyer |
Details for every rule are in the Incoterms 2020 guide: EXW, FOB, CIF.
EXW: why it is often a poor fit for exports
Ex Works looks simple for the seller, but it makes the buyer responsible for export clearance in the seller's country, which a foreign buyer often cannot do directly. In practice the seller ends up doing it anyway, without the rule saying so. Many exporters use FCA at their own premises instead: the seller clears export and loads the buyer's truck, and the responsibilities match what really happens.
FOB: the seller loads, the buyer ships
Under Free On Board the seller clears the goods for export and delivers them on board the vessel the buyer has nominated. From that moment the risk is the buyer's, and the buyer pays the ocean freight and any insurance. FOB suits buyers who have their own forwarder and good freight rates, and sellers who do not want to manage ocean freight.
CIF: the seller ships and insures, but risk passes early
Cost, Insurance and Freight adds two things to FOB: the seller books and pays the sea freight to the destination port, and buys cargo insurance for the buyer, at least Institute Cargo Clauses (C) for 110 % of the contract value. The trap is that risk still passes when the goods are on board at the origin port. If the goods are damaged at sea, the buyer claims on the insurance the seller bought.
Why containers usually call for FCA or CIP
Container cargo is normally handed to the carrier at a container yard or terminal days before it is loaded on the ship. Under FOB and CIF the seller keeps the risk during that time even though the box is out of their control. FCA (Free Carrier) and CIP (Carriage and Insurance Paid To) move the risk at handover to the carrier, which matches how containers actually move. CIP also requires broader ICC (A) insurance.
Which should you choose?
- Your buyer has a forwarder and wants control of freight: FCA (or FOB for break-bulk sea cargo).
- You can get better freight rates than your buyer, or the buyer wants a landed port price: CPT or CIP for containers, CFR or CIF for bulk sea cargo.
- The buyer wants delivery to their door: DAP, or DDP if you can handle import clearance and duties in their country.
- You want minimum involvement: FCA at your premises rather than EXW.
This is a plain-language summary of the Incoterms® 2020 rules, not legal advice. Incoterms® is a trademark of the International Chamber of Commerce; CartonMath is not affiliated with the ICC. Always name the place precisely, for example "FOB Ningbo, Incoterms 2020".
Tools used in this guide
Related guides
Common questions
Who pays freight under FOB?
The buyer pays the main sea freight; the seller pays to get the goods cleared for export and loaded on board.
Is CIF better than FOB for the buyer?
Not automatically. CIF is convenient, but the seller chooses the carrier and only minimum ICC (C) insurance is required, and risk still passes at the origin port.
Can FOB be used for air freight?
No. FOB, FAS, CFR and CIF are for sea and inland waterway transport only; use FCA, CPT or CIP for air.
What replaced DAT in Incoterms 2020?
DPU (Delivered at Place Unloaded) replaced DAT.