Your Buyer Just Said "Quote Me CIF": Now What?
Picture this: you just received an inquiry from a buyer in Malaysia. They say: "Please send us a CIF quote to Port Klang." You open Google, and suddenly you're drowning in acronyms.
Don't worry. Let's break each one down in plain language.
1. EXW: "Come Pick It Up From My Warehouse"
EXW (Ex Works) is the simplest Incoterm from your side. You just make the goods available at your factory or warehouse. The buyer arranges everything: pickup, export customs, shipping, and insurance.
Best for: Experienced buyers who already have their own freight agent in your country.
Your risk: Very low. But your price will also be the lowest, since you're not including any logistics costs.
Real example: A garment factory in Bandung sells to a Japanese importer. The importer has their own freight agent in Jakarta, so they pick up directly from the factory. EXW price = your production cost only.
2. FOB: "Deliver to Port, Buyer Handles the Rest"
FOB (Free On Board) is the most commonly used Incoterm in global trade. You're responsible for getting the goods loaded onto the ship at the departure port. Once it's on the ship, all risk transfers to the buyer.
Best for: Sea freight exports. This is the global standard most buyers are familiar with.
What you cover: Inland transport to the port + export clearance + loading onto the vessel.
What the buyer covers: Ocean freight + cargo insurance + import duties at their end.
Quick tip: If the buyer says "FOB Jakarta," your quoted price must include all costs up to and including loading at Tanjung Priok Port.
3. CFR: "Pay for Freight, Insurance is Buyer's Responsibility"
CFR (Cost and Freight) means you pay for ocean freight to the buyer's destination port, but you do NOT arrange insurance. If cargo is damaged at sea, that is the buyer's risk.
Best for: Buyers who already have their own cargo insurance policy.
What you need to calculate: Your production cost + ocean freight to destination port. Insurance is excluded from your CFR price.
4. CIF: "All-Inclusive Delivery to Destination Port"
CIF (Cost, Insurance, and Freight) is the most comprehensive. You pay for ocean freight AND cargo insurance to the buyer's destination port.
Best for: New buyers who don't want to deal with logistics themselves.
What to include in your CIF price: Production cost + export packaging + inland trucking + export clearance fees + ocean freight + insurance premium.
Warning: Because you're covering more costs, make absolutely sure all of these are factored into your selling price. Many new exporters forget to include insurance and end up with a smaller margin or even a loss.
Which One Should You Choose?
| Incoterm | Your Cost | Your Risk | Best For |
|---|---|---|---|
| EXW | Lowest | Lowest | Experienced buyers |
| FOB | Medium | Medium | General sea freight |
| CFR | Higher | Higher | Buyers with own insurance |
| CIF | Highest | Highest | Buyers who want all-inclusive |
Advice for new exporters: Start with FOB. It's the most familiar, the most commonly requested, and it splits responsibility fairly between you and your buyer.
