FOB, CIF and Incoterms in one page
Incoterms are the standard three-letter delivery terms published by the International Chamber of Commerce that say who pays for carriage and insurance and where risk passes from seller to buyer, and the two that dominate bulk commodity trade are FOB, free on board, and CIF, cost, insurance and freight. An FOB price covers the goods loaded aboard a vessel at the export port and nothing further. A CIF price covers the same goods delivered to a named destination port, with the ocean freight and the marine insurance already paid by the seller. Quote the same cargo both ways and you get two different numbers for identical beans, grain or ore.
Why does one cargo have two prices?
A commodity price is never only the price of the commodity. It is the price of the commodity plus whatever services the seller has agreed to perform before handing it over. Each Incoterm draws that line in a different place, and the seller prices in everything to the left of the line.
Work along the journey. Under EXW (ex works) the buyer collects at the seller’s gate and pays for everything after that, including export clearance. Under FCA (free carrier) the seller hands the goods to the buyer’s carrier, cleared for export. Under FOB the seller also pays inland haulage, port charges and loading, and risk passes once the goods are on board. Under CFR (cost and freight) the seller books and pays for the voyage, but risk still passes on loading. CIF is CFR plus a marine insurance policy in the buyer’s favor, with only minimum cover required unless the parties agree otherwise. At the far end, DAP (delivered at place) and DDP (delivered duty paid) push the seller all the way to the buyer’s premises, with DDP adding import duties.
Two consequences follow. First, the gap between an FOB quote and a CIF quote for the same route is a rough measure of freight and insurance on that route, so it widens when shipping is tight even if nothing has changed in the field or the mine. Second, risk and cost do not always transfer at the same moment: under CFR and CIF the seller pays for a voyage whose cargo already belongs, at risk, to the buyer. That is why a CIF buyer whose cargo is damaged at sea claims on the insurance rather than on the seller.
One more distinction matters for anyone reading contracts. FOB, CFR and CIF are written for cargo handed over at the ship, which suits bulk grain, ore and oil. For containers, where the seller loses control of the box at an inland terminal days before it is loaded, the ICC recommends FCA, CPT and CIP instead. Cocoa, coffee and rubber increasingly move in containers, so container terms appear more often in soft commodity contracts than the FOB shorthand suggests.
Each bar shows how far the seller’s cost obligation reaches; the triangle marks where risk passes, which is not always the same place.
A worked example
Two rice quotes in the same table make the point. In August 2026 Thai 5% broken rice was $471 per tonne FOB Bangkok and Vietnamese 5% broken rice was $410.9 per tonne, both quoted free on board at the origin (World Bank Pink Sheet). Because the voyage is excluded from both, the $60.10 per tonne gap is a statement about the two origins: milling quality, crop size, the baht and the dong, and how much old-crop stock each government is holding. Add freight to a common destination and the gap would change, because the two ports are not equidistant from every buyer.
Now look at two CIF lines from the same August 2026 table. Malaysian palm oil was $1,117 per tonne CIF Northwest Europe and US soybeans were $482 per tonne CIF Rotterdam (World Bank Pink Sheet). Both numbers already contain a voyage from Southeast Asia and from the US Gulf respectively, so neither can be set beside the Bangkok rice quote without adding the missing freight leg first. This is the single most common mistake in reading a price table: comparing a farm-gate-adjacent FOB number with a landed CIF number and calling the difference a margin. Much of it is ocean freight, and freight has its own cycle.
Trade statistics face the same problem, and different databases solve it differently. Customs authorities usually record exports FOB and imports CIF, which is why national import totals for the same shipments exceed export totals worldwide. CEPII BACI reconciles the two and reports both flows free on board. That is why cocoa beans under HS code 1801 show world exports of $18.87 billion and world imports of $18.87 billion in 2024 (CEPII BACI): the freight has been stripped out of the import side, so exporter and importer shares of the same $18.87 billion can be read side by side.
The practical rule is to check the basis before comparing anything. Compare origins on FOB, compare landed costs on CIF, and treat any difference between the two as a freight question until proved otherwise. That habit also clarifies the basis a physical trader quotes against a benchmark: “$40 over March, FOB Santos” is a complete price only once the delivery term is attached.
You can see the bases at work on the rice price page, which carries the Thai and Vietnamese FOB series, on the palm oil origins page, where the benchmark is CIF Northwest Europe, and in the trade tables on the cocoa page. For the codes those trade tables are built on, see HS codes explained; for the quirks of the World Bank table itself, see how to read the Pink Sheet.
Frequently asked questions
What is the difference between FOB and CIF?
An FOB price covers the goods loaded onto the vessel at the export port; the buyer then pays for the voyage. A CIF price covers the same goods plus ocean freight and marine insurance to a named destination port. For the same cargo, CIF is the larger number, and the difference is the cost of the voyage.
What does Incoterms stand for?
Incoterms is short for International Commercial Terms, a set of three-letter rules published by the International Chamber of Commerce. Each rule says who arranges and pays for carriage and insurance, and at which point risk passes from seller to buyer. The current edition is Incoterms 2020.
Is an FOB price better than a CIF price?
Neither is better; they answer different questions. FOB strips out shipping, so it is the cleaner way to compare what two producing countries earn. CIF shows what a cargo costs once landed, so it is the better guide to what a buyer in an importing country actually pays.
Are World Bank commodity prices FOB or CIF?
Both, depending on the series, and the label says which. Thai 5% broken rice was quoted at $471 per tonne FOB Bangkok in August 2026, while Malaysian palm oil was $1,117 per tonne CIF Northwest Europe in the same month (World Bank Pink Sheet). The two bases cannot be compared directly.
Why do world exports and world imports match in trade data?
Because some databases convert both flows to the same basis. CEPII BACI reports values free on board, so world cocoa bean exports and imports in 2024 both total $18.87 billion. Raw customs data usually reports exports FOB and imports CIF, which makes reported world imports the larger figure.