Resources / Shipping and terms
FOB, CFR and CIF explained for timber buyers
What each shipping term means, who pays the freight and insurance, and where the risk passes to you.
Sterling Trading Ventures · Updated October 2026
Every timber quote that crosses a border comes with a three-letter term: FOB, CFR or CIF. That term decides what the price includes, who books the ship, who insures the cargo, and the point at which the timber becomes your risk.
Two quotes for the same timber can look very different simply because they are on different terms. This guide explains the three terms used most in the timber trade, so you can compare prices properly and know what you are responsible for.
In short
- FOB (Free On Board): the seller loads the timber on the ship at the port of shipment. You pay the sea freight and insurance.
- CFR (Cost and Freight): as FOB, but the seller also pays the sea freight to your port. You insure the cargo.
- CIF (Cost, Insurance and Freight): as CFR, but the seller also buys basic cargo insurance for you.
Under all three, the risk passes to you once the timber is on board at the port of shipment, not when it arrives. The terms are defined by the International Chamber of Commerce in Incoterms 2020.
Who does what, at a glance
| Step | FOB | CFR | CIF |
|---|---|---|---|
| Export clearance and origin documents | Seller | Seller | Seller |
| Loading on board at the port of shipment | Seller | Seller | Seller |
| Sea freight to your port | Buyer | Seller | Seller |
| Cargo insurance | Buyer | Buyer | Seller (minimum cover) |
| Risk of loss or damage at sea | Buyer | Buyer | Buyer |
| Unloading and port charges at destination | Buyer | Buyer, usually | Buyer, usually |
| Import clearance, duties and taxes | Buyer | Buyer | Buyer |
| Delivery from your port to site | Buyer | Buyer | Buyer |
Each term is always followed by a named port. FOB names the port of shipment, for example FOB Port Klang. CFR and CIF name your port of discharge, for example CIF Malé or CFR Fremantle.
Each term explained
FOB: Free On Board
The seller prepares the timber, clears it for export and delivers it on board the ship you nominate at the port of shipment. From there, everything is yours: booking the freight, paying it, insuring the cargo and clearing it at your end.
FOB suits larger importers who have their own freight forwarder and contracted rates. You control the shipping line, the sailing and the cost of freight, but you also carry the work of arranging it.
CFR: Cost and Freight
The seller does everything under FOB and also books and pays the sea freight to your port. The price you see is the timber delivered to your port, before insurance, unloading and import costs.
CFR suits buyers who want a price to their port without managing the shipping, and who already hold marine cargo insurance, often an annual policy that covers all their imports.
CIF: Cost, Insurance and Freight
CIF is CFR plus cargo insurance, which the seller buys for your benefit. Incoterms 2020 only requires minimum cover under Institute Cargo Clauses (C), for at least 110 per cent of the contract value.
That covers major events such as the ship sinking, fire or jettison, but not most damage from handling or water.
CIF is the simplest term to compare, because the price covers the timber, the freight and basic insurance to your port. If the cargo is valuable or easily marked, such as dressed decking or glulam, ask for all-risks cover under Institute Cargo Clauses (A), or insure it yourself.
Where the risk passes, and why it matters
The most common mistake is to assume that because the seller pays the freight under CFR or CIF, the seller is also responsible until the timber arrives. It is not. Under all three terms, the risk passes to you once the timber is loaded on board at the port of shipment.
So if a container is damaged at sea, the claim is yours to make against the insurer or the shipping line. This is why insurance matters on every shipment, whichever term you buy on.
A note on containers
Strictly, the International Chamber of Commerce suggests FCA, CPT and CIP for container cargo, because a container is usually handed to the terminal days before it goes on board.
In practice, FOB, CFR and CIF remain the standard terms in the timber trade and are what most buyers, banks and insurers expect. If your bank or insurer prefers the container terms, tell us when you ask for a quote.
How the term affects import duty
Countries value imports differently for duty. Australia calculates customs duty on the FOB value, while many other countries use the CIF value. Your customs broker will ask for the freight and insurance figures either way, so keep them separate on your paperwork.
How to choose the right term
The right term depends on what you already have in place. These rules cover most buyers:
- You have a forwarder and good freight rates: buy FOB and keep control of the shipping.
- You want a price to your port and already hold marine insurance: buy CFR.
- You want the simplest comparison and buy occasionally: buy CIF, and consider topping up the insurance to all-risks cover.
- You need the timber on site, not at the port: ask for a delivered price to site and we will quote it where it suits the project.
Whichever term you choose, compare quotes on the same basis. Add your own freight and insurance to an FOB price before you set it against a CIF price, and remember that destination port charges, clearance, duties and transport to site sit on top of all three.
Documents
The shipping documents matter as much as the timber, so it helps to know what to expect. A container shipment normally comes with:
- Commercial invoice and packing list
- Bill of lading, issued once the timber is on board
- Phytosanitary certificate and certificate of origin
- Treatment or fumigation certificates where your country requires them
- Insurance certificate, under CIF
The bill of lading is issued once the timber is on board, which is the point at which the risk passes to you. The full detail is in our terms of trade.
Tell us what you need. We will reply as soon as possible.
Common questions
What is the difference between FOB and CIF?
Under FOB the seller loads the timber on board at the port of shipment and you arrange and pay the sea freight and insurance. Under CIF the seller also pays the freight to your port and buys basic cargo insurance for you. In both cases the risk passes to you once the timber is on board at the port of shipment.
Does CIF mean the seller is responsible until the timber reaches my port?
No. This is the most common misunderstanding. Under CIF and CFR the seller pays the freight, but the risk of loss or damage passes to you when the timber is loaded on board at the port of shipment. That is why the insurance under CIF is taken out for your benefit.
Is CIF insurance enough cover?
CIF only requires minimum cover, Institute Cargo Clauses (C), for at least 110 per cent of the contract value. It covers major events such as sinking or fire, not most damage in handling. Many importers top it up to all-risks cover, Institute Cargo Clauses (A), or use their own annual marine policy and buy CFR instead.
Who pays the port charges at my end?
Under FOB, CFR and CIF the buyer normally pays the unloading and terminal charges at the destination port, plus customs clearance, duties, taxes and delivery to site, unless the freight contract says otherwise. Ask your forwarder or customs broker for these costs before you compare quotes.
Which term should I choose?
If you have your own freight forwarder and good freight rates, FOB gives you the most control. If you want a price to your port and already hold marine insurance, choose CFR. If you want the simplest landed comparison and are happy with basic cover, choose CIF.
Which Incoterms do you quote?
We quote FOB, CFR or CIF under Incoterms 2020 for every product, and can quote to a specific site where that suits a project.
Want a price to your port?
Tell us the timber, the volume and your port, and the term you prefer. We will quote FOB, CFR or CIF and list the documents that come with the shipment.
Related: How we work · Terms of trade · Timber products · Australian and NZ timber · All guides
Term definitions follow Incoterms 2020 from the International Chamber of Commerce. This guide is general information, not legal or insurance advice. Check your contract, insurer and customs broker for your shipment.