Shipping Terms FOB, CNF, and CIF
What does it mean to ship Freight on Board (FOB) as opposed to Cost Insurance and Freight (CIF) or just Cost and Freight (CNF)? Many people on the outside of international shipping would not know what this means, but many people who are using these terms do not know what they actually mean either. They were told at one point that all of their company's cargo ships FOB, so that's what they write on their purchase orders. These international commerce terms or incoterms are used to determine when each side, shipper and consignee, will take responsibility for the shipment. These terms show when are they liable for losses, damages and other issues that may come up. These terms are usually agreed upon before the cargo is even ready for shipping and sometimes have been agreed upon for years. In shipping FOB (port name), the shipper is agreeing to take responsibility only until the shipment is secured on a vessel. This means if something happens while loading, they are still liable. In CIF and CNF, the shipper is responsible until unloading with one difference between the two types. CIF means they will pay for the cost, the insurance and the freight, where CNF means the consignee is responsible for the insurance only. These terms are misused throughout the industry and bent to make it make sense for the people involved. Sometimes people will use FOB destination instead of CIF. As long as everyone involved is on the same page, it really does not matter what you call it; until there is a problem of course.