If you are buying a container of used clothing from overseas, the price on the quote means very little until you know which Incoterm it was built on. Incoterms are the standard trade terms published by the International Chamber of Commerce. They say who arranges and pays for each leg of the journey and, just as importantly, the point at which responsibility for the goods passes from seller to buyer. Three of them, FOB, CFR and CIF, come up constantly in bale exports.
What an Incoterm Actually Decides
An Incoterm is shorthand written into the sales contract and invoice. It does not say when you pay or who owns the goods in law. It answers three practical questions:
- ·Who pays for what: loading, export clearance, ocean freight, insurance, import duties.
- ·Where risk transfers: the point at which damage or loss becomes the buyer's problem rather than the seller's.
- ·Who handles which paperwork: export documents versus import documents.
Always write the term together with a named place, for example "FOB named port of loading", so there is no argument about where the handover happens.
FOB: Free On Board
Under FOB, the seller delivers the cargo onto the vessel at the named port of loading. The seller handles export clearance and gets the container to the port and aboard. From the moment the goods are on board, risk passes to you, and you pay the ocean freight, insurance and everything at the destination end.
FOB suits buyers who have a freight forwarder they trust or who want to compare ocean rates themselves. The trade-off is that you carry the shipping workload and the risk during the voyage. If you choose FOB, arrange cargo insurance yourself, because the carrier's liability is limited and rarely covers the full value of a load.
CFR: Cost and Freight
Under CFR, the seller books and pays the ocean freight to the named port of destination. You do not pay a separate freight invoice at the origin end, which makes the quote easier to compare against a landed budget. The critical detail is that risk still passes to you when the goods are loaded on the vessel at origin, not when they arrive. The seller pays for the voyage, but you carry the risk of it.
That gap catches first-time importers out. If the container is lost or damaged at sea and you have no insurance of your own, you have paid for goods you may not receive.
CIF: Cost, Insurance and Freight
CIF is CFR plus a minimum level of insurance bought by the seller for your benefit. Risk still transfers at the port of loading, but the seller has arranged a policy that names you as beneficiary. The default cover is minimal, so check what it actually covers, the insured amount and how a claim would be made. Many buyers add their own broader policy on top.
Side-by-Side Comparison
- ·FOB: seller pays to the vessel. You pay ocean freight and insurance. Risk passes on loading.
- ·CFR: seller pays to the vessel and the ocean freight. You arrange insurance. Risk passes on loading.
- ·CIF: seller pays to the vessel, the ocean freight and minimum insurance. Risk passes on loading.
In all three, import duties, taxes, port charges at destination and inland delivery are normally yours. That is why these terms are only the start of a landed cost calculation, never the whole of it.
How the Term Affects Your Documents
The term you pick shapes the paperwork. On a CFR or CIF shipment the seller books the ocean leg, so you should review the bill of lading draft carefully, including the freight prepaid or collect marking. On FOB, your forwarder usually books the vessel and you coordinate with the seller on the cut-off and container pickup.
Questions to Ask Before You Accept a Quote
- ·Which Incoterm and which named place does this price assume?
- ·What exactly is included: loading, export clearance, documents, container, ocean freight?
- ·What is excluded: destination port charges, duties, inland haulage, demurrage?
- ·Is insurance included, and who is the beneficiary?
- ·What documents will I receive, and in what form?
Quotes that look cheap often leave out a leg that another quote includes. Put the terms side by side before you compare the totals.
A Practical Way to Choose
A buyer with an experienced forwarder and a cargo policy in place often prefers FOB for control. A first-time importer may prefer CFR or CIF so there is one fewer party to coordinate, as long as they understand that risk has already transferred at origin. Either way, confirm the rules with your customs broker and forwarder, since local requirements and insurance practice vary by country.
RawBales supplies full 40,000 lb loads of used clothing to business buyers. Read how export orders work, see the used clothing export containers page, or request a quote and tell us your destination port so we can discuss the terms that fit your shipment.