CIF Compared: How CIF Differs from FOB, CFR, and DDP

Understanding CIF in the context of other common Incoterms

When learning international trade, comparing CIF to other widely used Incoterms such as FOB, CFR, and DDP helps beginners grasp what each term shifts in terms of cost, risk, and responsibility. This article explains the differences in a friendly, practical way and offers scenarios to help you choose the right term for your shipment.

CIF at a glance

CIF (Cost, Insurance, and Freight) requires the seller to arrange and pay for transport to a named port of destination and to obtain marine insurance for the buyer’s benefit during the main carriage. The buyer handles import duties, customs clearance at destination, and unloading (unless otherwise agreed).

FOB — seller prepares and loads, buyer pays freight

Under FOB, the seller is responsible for export packing, export clearance, and loading the goods on board the vessel at the named port of shipment. Once goods cross the ship’s rail at that port, risk transfers to the buyer. The buyer arranges and pays for ocean freight and insurance. FOB gives the buyer control of the main carriage and choice of carrier; it’s common when buyers prefer to manage shipping themselves.

CFR (Cost and Freight) — like CIF but without insurance

CFR requires the seller to pay costs and freight to bring the goods to the named port of destination, similar to CIF. The key difference is insurance: under CFR, the seller has no obligation to procure insurance for the goods in transit. The buyer bears risk from the point defined by the rule (generally when goods pass the ship’s rail at the port of shipment) and should arrange insurance if they want cover during the sea leg.

DDP (Delivered Duty Paid) — seller delivers to buyer’s door

DDP places maximum responsibility on the seller: the seller delivers the goods to the buyer’s premises (or another agreed place) in the buyer’s country and bears all costs and risks, including export and import customs formalities, duties, and taxes. DDP is buyer-friendly because it shifts nearly all logistics and regulatory burden to the seller, and it’s useful when buyers want a fully landed cost. Sellers must be prepared to handle import compliance in the buyer’s country.

Side-by-side comparison—cost, risk, and insurance

• Cost of freight: FOB—buyer pays; CFR/CIF—seller pays to named port; DDP—seller pays to final destination.
• Insurance responsibility: FOB—buyer arranges; CFR—buyer arranges (seller not required); CIF—seller arranges minimum insurance; DDP—seller may arrange insurance but contract should specify details.
• Import clearance and duties: FOB/CFR/CIF—buyer handles import clearance and duties; DDP—seller handles import clearance and duties.
• Risk transfer point: FOB/CFR/CIF—risk typically passes when goods cross the ship’s rail at the port of shipment (check Incoterms version for precise language); DDP—risk passes when goods are delivered to the agreed place in the buyer’s country.

When to choose CIF vs. FOB

Choose CIF if you want the seller to manage sea freight and arrange basic insurance. This reduces the buyer’s workload for the export leg. But choose FOB if you want control over carrier selection, freight pricing, and insurance; FOB is common when the buyer has logistics relationships that deliver better rates or services. For example, an experienced importer with negotiated ocean rates will often prefer FOB to capture cost savings and control schedules.

When CFR makes sense

CFR is appropriate when the buyer is fine arranging insurance and prefers to control or choose insurance terms. CFR can be slightly cheaper on paper than CIF because the seller isn’t required to buy insurance, but buyers should factor in the cost of arranging adequate cover themselves.

When to use DDP

Use DDP for maximum convenience if the seller is willing and able to manage import clearance and pay duties. DDP is often used in business-to-consumer (B2C) sales or when selling to customers who don’t want any import-side responsibilities. Sellers must ensure they can legally and practically perform import formalities in the buyer’s country.

Simple scenarios to illustrate choices

1. Small retailer new to importing: Prefers CIF because the seller will arrange sea freight and basic insurance; the buyer handles local customs and delivery arrangements.
2. Large importer with logistics team and negotiated rates: Prefers FOB to control carrier selection and optimize freight costs.
3. Buyer wants fully landed price: Prefers DDP so the seller quotes a single price including duties and delivery to the buyer’s door.

Key considerations before choosing an Incoterm

Consider cost transparency, who manages carrier relationships, who will handle customs, whether you need full insurance cover, and your ability to manage logistics in the other country. Also, always specify the precise Incoterms version (e.g., Incoterms 2020) in contracts because definitions and responsibilities evolve over time.

Final friendly tip



No single Incoterm is universally best—your choice should reflect who wants control, who can handle regulatory tasks, and how risk and cost should be split. CIF is a practical compromise for ocean freight when the buyer prefers the seller to manage transport and basic insurance, but it’s worth comparing quotes under FOB, CFR, and DDP to choose the most appropriate arrangement for your trade relationship.