Understanding FOB, CFR and CIF Incoterms for Car Shipping

Incoterms are standardized trade terms that define where the seller's responsibility ends and the buyer's begins. For used-car exports from Japan you will most often see FOB, CFR, and CIF. They differ in how much of the journey and cost the quoted price covers.

FOB, or Free On Board, means the seller delivers the vehicle loaded onto the vessel at the Japanese port, and the buyer takes over cost and risk from there, including ocean freight and insurance. CFR, or Cost and Freight, adds the ocean freight to the destination port to the seller's price, but insurance during the voyage remains the buyer's concern.

CIF, or Cost, Insurance and Freight, goes one step further by including marine insurance up to the destination port in the seller's price. It is the most inclusive of the three for the buyer, though it is wise to check the level of insurance cover provided rather than assume it is comprehensive. In every case, the buyer still handles import duties, taxes, and clearance at home.

When comparing offers, always confirm which Incoterm a price uses, because an FOB figure and a CIF figure are not comparable on their face. Ask exactly what is and is not included, and where risk transfers. A clear answer lets you build an accurate total landed cost and avoid nasty surprises at the destination.