FOB vs CIF vs CFR: Which Incoterm Should You Use When Importing Machinery From China?

Why the Incoterm matters more than the unit price

When you receive a quote for a road sweeper or skid steer loader, the number that matters isn't just the unit price. It's the three-letter Incoterm printed next to it. Incoterms (International Commercial Terms, published by the International Chamber of Commerce) define exactly where the seller's responsibility ends and yours begins. Pick the wrong one and a "cheap" machine can become expensive the moment it leaves the factory.

This guide covers the three terms you'll see most often when sourcing heavy machinery from China: FOB, CFR, and CIF.

FOB (Free On Board)

Under FOB Qingdao, the seller delivers the goods, cleared for export, loaded onto the vessel you (or your freight forwarder) nominate at the port of Qingdao. From the moment the cargo is on board, risk and cost transfer to you.

You arrange and pay for: ocean freight, marine insurance, destination charges, customs clearance, and inland delivery in your country.

FOB is the most popular term for experienced importers because it gives you control. You choose your own forwarder, you compare freight rates, and you decide on the insurance coverage. If you ship regularly, your negotiated freight rate is often lower than what a supplier would quote you.

CFR (Cost and Freight)

Under CFR (sometimes written C&F), the seller pays for the goods and the ocean freight to your destination port. But, and this is the part buyers miss, risk still transfers to you once the goods are on board in China. The seller is paying the freight bill, not carrying the risk during the voyage.

CFR is convenient if you don't want to arrange freight yourself, but you should still buy your own marine insurance, because the seller has no obligation to insure the cargo.

CIF (Cost, Insurance and Freight)

CIF is CFR plus insurance. The seller pays freight to the destination port and buys a minimum level of marine insurance on your behalf. It's the most "hands-off" term, and the supplier handles almost everything up to the arrival port.

The catch: the minimum insurance required under CIF is often the lowest available coverage (Institute Cargo Clauses C), which may not fully protect a high-value machine. Many buyers accept CIF for convenience, then top up the coverage themselves.

So which should you choose?

• Choose FOB if you ship often, have a trusted freight forwarder, and want the lowest landed cost and full control. This is what we recommend for most repeat buyers, and why our standard term is FOB Qingdao.
• Choose CFR/CIF if this is your first import, you don't yet have a forwarder, and you'd rather the supplier coordinate the ocean leg, accepting that you may pay a small premium for the convenience.

Whatever you choose, confirm in writing which port, who books the vessel, and what insurance is in place before you pay a deposit.

Need a quote in FOB Qingdao or CIF to your nearest port? Tell us your destination and we'll lay out both so you can compare.