In a seaborne petroleum deal, the Incoterm is one of the first things to agree. It decides who arranges and pays for the shipping, and the point at which the risk passes from seller to buyer.
FOB: free on board
Under FOB, the seller delivers the cargo on board the vessel nominated by the buyer at the loading port. Risk passes to the buyer once the cargo is loaded. The buyer arranges and pays for the freight and the insurance.
CFR: cost and freight
Under CFR, the seller arranges and pays for the sea freight to the named destination port. Risk still passes to the buyer when the cargo is loaded on board, even though the seller has paid for the voyage. The buyer is responsible for insurance.
CIF: cost, insurance and freight
CIF works like CFR, with one addition: the seller also buys marine insurance for the cargo, naming the buyer as the beneficiary. Risk again passes at loading.
Choosing between them
- FOB gives the buyer full control of the vessel and the freight.
- CFR and CIF suit buyers who prefer the seller to organise the voyage.
- The choice affects the price, so offers on different terms need to be compared like for like.
Whichever term is chosen, it should be written into the contract together with the delivery window, the discharge port and the payment milestones.
Talk to our trading desk
If you are planning a purchase of refined products, tell us the product, volume and delivery schedule and we will come back with an offer.
Contact us