FOB, CFR or CIF: which Incoterm suits importers in West Africa?
FOB, CFR and CIF split freight, insurance and risk differently. A plain guide for importers buying from Vietnam into Conakry, Abidjan, Tema, Takoradi or Lagos.
Choose FOB if you have a freight forwarder you trust and want to control freight and insurance. Choose CFR or CIF if you want the seller to bring the cargo to your port at one price. In all three, the risk passes to you once the goods are on board the ship in Vietnam.
What is the difference between FOB, CFR and CIF?
All three are Incoterms 2020 rules for goods moving by sea. They decide who arranges and pays for each step between the factory and your port. The seller always handles export clearance in Vietnam and loads the goods on board. The difference starts after that.
| Term | Seller pays and arranges | Buyer pays and arranges |
|---|---|---|
| FOB (Free On Board) | Export clearance and loading on board at the port of loading | Ocean freight, insurance if wanted, import clearance, destination costs |
| CFR (Cost and Freight) | Everything in FOB, plus ocean freight to the named destination port | Insurance if wanted, import clearance, destination costs |
| CIF (Cost, Insurance and Freight) | Everything in CFR, plus marine insurance for the buyer’s benefit, at minimum cover | Import clearance, destination costs, any extra insurance |
Who carries the risk during the voyage?
This is the point that surprises many first-time importers. Under CFR and CIF the seller pays for the freight, but the risk of loss or damage still passes to the buyer when the goods are on board at the loading port. The ship may take weeks to arrive, so cover matters for the whole voyage, even when you did not book the freight yourself.
Under CFR nobody is obliged to buy insurance, so arrange your own cover. Under CIF the seller buys a policy, but it is usually the minimum cover. If the machines are valuable to your season, ask what the policy covers, or add your own.
Which term should an importer in West Africa choose?
- FOB suits you if you work with a forwarder you trust, want to compare freight offers, and are happy to arrange insurance yourself. You see each cost separately.
- CFR suits you if you want one price to your port and you insure the cargo separately.
- CIF suits you if you want one price to your port with basic insurance included, and you will check whether that cover is enough.
One technical note: the International Chamber of Commerce recommends FCA, CPT or CIP for goods that travel in containers, because a container is usually handed to the carrier at a terminal before it is loaded on the ship. FOB, CFR and CIF are still widely used for container cargo. Whichever you choose, write the exact named port after the term in the contract, for example “CFR Abidjan”.
What can a CFR or CIF price leave out?
A price to your port is not a price to your yard. Confirm in writing what is included at the destination. These items are often separate:
- terminal and unloading charges at the destination port;
- port storage once the free days have passed;
- import duties, taxes and local clearance;
- transport from the port to your premises.
Adding these to the quoted freight is how you get to a true landed cost. Our guide on why freight can cost more than the machine explains how the load plan changes the freight each machine carries.
Which terms and ports do we quote?
Hannah Trading quotes FOB Hải Phòng. We also quote CFR or CIF to the ports our importers use most:
- Conakry, Guinea;
- Abidjan, Côte d’Ivoire;
- Tema or Takoradi, Ghana;
- Lagos or Apapa, Nigeria.
Other ports in Asia and South America on request. Whatever term you pick, you will need the right paperwork on time: see the export documents checklist.