FOB, CIF and FCA are the three Incoterms most commonly quoted by Indian exporters. This article explains each in plain language, who pays for what, and which to choose based on your shipment and risk profile.
If you have ever received a quotation from an Indian exporter, you have probably seen three letters at the end of the price: FOB, CIF or FCA. These letters are not a formality — they completely change what you are paying for, who arranges the shipping, and where risk transfers. Choosing the wrong Incoterm can quietly turn a competitive quote into an expensive one.
This article explains FOB, CIF and FCA in practical terms and gives you a decision framework for choosing between them.
What are Incoterms?
Incoterms (International Commercial Terms) are published by the International Chamber of Commerce. They define, in a standardised way, the responsibilities of buyer and seller in an international transaction — specifically who pays for transport, insurance and documentation, and at what physical point risk transfers from seller to buyer.
The current version is Incoterms 2020. The most commonly used Incoterms in Indian exports are EXW, FCA, FOB, CFR and CIF.
FOB — Free On Board
Under FOB, the seller's responsibility ends once the goods are loaded on board the vessel at the named port of shipment. The seller handles:
- Production, packaging and labelling.
- Export clearance.
- Inland transport to the port.
- Terminal handling and loading on board the vessel.
The buyer handles:
- Ocean freight.
- Marine insurance.
- Destination port charges and import clearance.
- Inland transport to the final warehouse.
Risk transfers when the goods are on board the vessel. FOB is widely used for containerised shipments from India to global ports and is the default for many buyers who want to control their own freight.
CIF — Cost, Insurance and Freight
Under CIF, the seller arranges and pays for ocean freight and minimum marine insurance in addition to everything covered under FOB. The seller handles:
- Everything under FOB.
- Ocean freight to the named destination port.
- Minimum marine insurance (typically Institute Cargo Clauses C).
The buyer handles:
- Destination port charges.
- Import clearance and duties.
- Inland transport to the warehouse.
Risk still transfers when the goods are loaded on board the vessel at the origin port — even though the seller is paying for freight. This is the most misunderstood aspect of CIF. The seller arranges freight and insurance as a service, but the risk has already passed to the buyer.
FCA — Free Carrier
FCA is the modern, flexible alternative to FOB and is increasingly recommended for containerised cargo. Under FCA, the seller delivers the goods, cleared for export, to the carrier or another person nominated by the buyer at a named place. This named place can be:
- The seller's premises (where the buyer's nominated truck picks up).
- A terminal or CFS (Container Freight Station) at the origin port.
For LCL (less-than-container-load) shipments and air freight, FCA is usually the correct Incoterm rather than FOB, because FOB technically only applies to on-board vessel delivery. FCA also supports a "named-place" delivery where the Bill of Lading can be issued after the carrier takes custody — which solves the well-known FOB problem where the buyer's named forwarder delays issuing the on-board BL.
Side-by-side comparison
- **Seller's cost coverage:** FOB = up to vessel rail at origin port. CIF = up to destination port + insurance. FCA = up to nominated carrier/place.
- **Risk transfer:** FOB and CIF = on board vessel at origin. FCA = when handed to nominated carrier.
- **Who books freight:** FOB and FCA = buyer. CIF = seller.
- **Best for:** FOB = full container loads from a port you trust. CIF = small buyers who prefer seller to handle freight. FCA = LCL, air freight, and containerised cargo where modern practice is preferred.
Which should you choose?
There is no single "best" Incoterm. The right choice depends on your shipment profile.
- **You are a first-time importer with no freight forwarder.** Consider CIF, at least for the first shipment. The seller arranges freight and insurance, which simplifies coordination. Just remember that risk still passes at origin.
- **You have a nominated freight forwarder and want cost control.** Choose FOB or FCA. You will typically get better freight rates and visibility through your own forwarder than through the seller's nominated carrier.
- **You are shipping LCL or air freight.** Choose FCA. FOB does not fit LCL or air shipments cleanly.
- **You are a large buyer with destination clearance expertise.** FOB or FCA gives you the most control and usually the lowest landed cost.
- **You want a single point of contact for everything.** CIF (or DAP, if the supplier agrees) reduces your coordination load, but usually at a margin to the seller.
Common mistakes
- Comparing FOB and CIF prices as if they are equivalent — they are not. The CIF price includes freight and insurance; the FOB price does not.
- Forgetting that under CIF, risk transfers at the origin port, not at the destination port.
- Using FOB for air shipments or LCL cargo. Use FCA instead.
- Allowing the seller's "CIF freight" to be opaque. Ask for a freight breakdown if you suspect the seller is inflating freight.
Practical tip
When you issue an RFQ, always specify the Incoterm you want quoted. If you are unsure, ask the supplier to quote both FOB and CIF for the same destination port so you can compare apples to apples. Also insist that the Incoterm, named port and place be written in full on the Proforma Invoice — for example, "FOB Nhava Sheva, India, Incoterms 2020".
Need help?
Blueroute Exim helps buyers understand and negotiate Incoterms on quotations from Indian suppliers. If you have a quotation in hand and want a second opinion on whether the Incoterm and freight are reasonable, send it to us — references and compliance documents are available on request.