FOB, CIF or FCA? Shipping terms explained for first-time bag importers
Three letters on a quotation decide who pays for the ship, who buys the insurance, and when the bags stop being our problem and start being yours.
Every export quotation has a short code next to the price: FOB Kolkata, CIF Hamburg, FCA something. First-time importers sometimes skip right past it to the number. That's understandable, but the code changes what the number means. Two quotes can look very different and turn out to be almost the same once you add freight and insurance.
These codes are called Incoterms. They are published by the International Chamber of Commerce (ICC), and the current version is Incoterms® 2020. Each one comes with a named place, which is important. “FOB” on its own is incomplete. “FOB Kolkata” is a term.
In this guide: FOB: Free On Board · CIF: Cost, Insurance and Freight · FCA: Free Carrier · The three, side by side · The others you might see · So which should you ask for? · Questions buyers ask us
FOB: Free On Board
We deliver the goods on board the ship at the port of loading, cleared for export. From that moment the risk is yours, and you pay the sea freight, insurance and everything at your end.
Good when you have a freight forwarder you trust, or your company already ships from India and gets good freight rates. FOB is for sea freight only.
CIF: Cost, Insurance and Freight
We pay the sea freight and the insurance to your destination port. Sounds like we take care of everything, right? Not quite. The risk still passes to you once the goods are on board at the loading port. We pay for the journey, but if something happens on the way, you claim on the insurance.
Two things worth knowing about CIF:
- The insurance the seller must buy under CIF is minimum cover (the ICC calls it Institute Cargo Clauses C). If you want wider cover, ask for it, or buy your own.
- Charges at the destination port, customs clearance and duties are usually still yours.
Good when you are new to importing and don't have a forwarder yet. One price gets the goods to your port.
FCA: Free Carrier
We hand the goods, cleared for export, to the carrier you choose at an agreed place. For example, a container freight station or terminal. Risk passes to you at that handover.
Why does this exist when FOB looks so similar? Because with containers, the seller usually hands the goods over at a terminal well before they are lifted onto the ship. Under FOB, the seller still carries the risk during that gap, while having no control over the terminal. FCA matches what actually happens. That's why the ICC recommends FCA rather than FOB for container shipments. FCA also works for any transport: sea, air, road.
The three, side by side
| FCA | FOB | CIF | |
|---|---|---|---|
| Export clearance | Seller | Seller | Seller |
| Main freight paid by | Buyer | Buyer | Seller |
| Insurance paid by | Buyer (if wanted) | Buyer (if wanted) | Seller (minimum cover) |
| Risk passes to buyer | At handover to carrier | On board at loading port | On board at loading port |
| Import duties and taxes | Buyer | Buyer | Buyer |
| Transport | Any | Sea only | Sea only |
The others you might see
EXW (Ex Works): you collect from the seller's premises and handle everything after that, including export clearance in India. Rarely a good idea unless your agent is in India.
DAP (Delivered At Place): the seller delivers to an agreed place in your country. You pay import duties and taxes.
DDP (Delivered Duty Paid): the seller also pays your import duties and taxes.
So which should you ask for?
If you have a forwarder: FCA or FOB, and let your forwarder book the freight. If you don't: ask for CIF to your nearest port, and get a quote from a local customs broker for the clearance at your end, so you know the full landed cost.
We agree the shipping term with each buyer and state it in the quotation. Whatever the term, you get the commercial invoice and packing list, and a certificate of origin when your country requires one. Our bag terms page has short definitions of all of these if you need them at a glance.
This is a plain-English guide, not legal advice. The exact responsibilities are set out in the ICC's Incoterms® 2020 rules and in your sales contract.
If you're ordering for the first time and have no forwarder yet, a term where the seller books the freight, such as CIF, is often simpler. It's the one option where you're not left chasing a shipping line mid-order, and the extra cost is usually smaller than the stress it saves on a first shipment.
Questions buyers ask us
What is the difference between FOB and CIF?
Under FOB the buyer pays the sea freight and insurance. Under CIF the seller pays freight and minimum insurance to the destination port. In both, the risk passes to the buyer once the goods are on board at the loading port.
Why does the ICC recommend FCA instead of FOB for containers?
Container goods are usually handed over at a terminal before loading. FCA moves the risk at that handover, which matches what actually happens.
Which shipping terms does Trenova Exim offer?
We agree the shipping term with each buyer and state it, with the named place, in the quotation.
Who pays import duty under CIF?
The buyer. Under FOB, FCA and CIF, import duties and taxes in the buyer's country are paid by the buyer.
Tell us what you need.
Product, quantity and destination is enough to start. We review your requirement and reply with a quotation.