FOB vs CIF: Which Shipping Term Is Better for Your Electronics Business?

What each term really means (Incoterms® 2025)

FOB – Free On Board (Port of Shipment)

Seller: clears export, delivers goods on board the vessel at the named port.
Buyer: pays ocean freight, insurance, destination charges, and handles import.
Risk transfers: when goods are on board at origin.
Use for sea/inland waterway. (For air/multimodal, use FCA instead.)

CIF – Cost, Insurance and Freight (Port of Destination)

Seller: clears export, books & pays ocean freight to the named destination port, and buys minimum cargo insurance for buyer (Institute Cargo Clauses “C”, typically 110% of invoice).
Buyer: pays destination charges and import.
Risk transfers: still at origin on board (even though seller pays freight & insurance).
Sea/inland waterway only. (For multimodal equivalent, use CIP, which requires broader “A” insurance.)

Pros

Cost control & transparency: you choose the forwarder, route, carrier, and insurance level.
Avoid hidden markups in seller-arranged freight.
Flexibility across shipments and consolidation (useful if you buy from multiple suppliers).

Cons

Pros

Cons

Risk still passes at loading: a loss at sea is technically your risk; you must claim on the seller’s policy (slower).
Insurance is minimum (Clause C) unless you ask & pay for upgrades—may be inadequate for high-value electronics or lithium-battery cargo.
Less control over carrier/ETA; possible high destination charges from seller-chosen carrier/agent.

Origin: factory handling, export customs, terminal handling.
Main carriage: ocean freight + surcharges (BAF, PSS, etc.).
Insurance: cargo value × rate (CIF includes minimum; FOB you choose).
Destination: terminal handling, documentation, delivery order, demurrage/detention (if delays), import duties/VAT, local drayage.

👉 Rule of thumb: Under FOB, you control main carriage + insurance.
Under CIF, you still pay destination costs and taxes either way.

Choose FOB if you:

Have (or want) a trusted forwarder and need predictable, transparent landed costs.
Plan to consolidate multiple suppliers in Shenzhen/Guangzhou.
Ship electronics with batteries and want to control dangerous-goods handling & better insurance.

Choose CIF if you:

Are new and want a single price to port for the first trial order.
Need the seller to handle space booking during peak season.
Your port agent can confirm reasonable destination fees for the carrier the seller will use.

Specify the term precisely:
“FOB Shenzhen, Incoterms® 2020” or “CIF Hamburg, Incoterms® 2020”.
Upgrade insurance when needed (CIF→request Clause A). High-value SKUs and UN3481 lithium batteries merit broader coverage and clear packing/labeling.
Pre-agree destination charges (or get a not-to-exceed quote from a local agent) to avoid surprises under CIF.
Mind mode suitability: for air or rail, use FCA/CIP, not FOB/CIF.
Document control: under CIF, confirm who holds the original B/L and how you’ll receive it (or use telex release) to prevent delays.
Watch detention/demurrage: arrange pickup quickly; electronics margins suffer from storage fees.

FOB Shenzhen: Unit price $9.50 → You book freight & insurance; landed-to-port driven by your forwarder’s rates; full visibility, easy consolidation.
CIF Los Angeles: Unit price $10.05 (freight+basic insurance included) → You still pay destination/handling; simple for a trial, but less control and slower insurance claims if cargo is damaged.

Experienced importers: FOB usually wins on control, transparency, and total cost over time.
First-time/one-off shipments: CIF can reduce coordination effort—just upgrade insurance and pre-check destination fees.