Importing frozen seafood is a high-stakes operation where every detail matters. A single misstep in the supply chain can jeopardize a valuable shipment, and the choice of shipping term, or Incoterm, plays a crucial role in managing your risk and costs.
As your partner in Indonesia, we believe that an informed decision is your strongest asset. This guide provides a clear breakdown of the three most common Incoterms—FOB, CIF, and CFR—to help you select the term that best protects your business and investment.
Understanding the Key Incoterms
Incoterms are a globally recognized set of rules that clearly define the responsibilities between a seller and a buyer. They specify who manages the logistics, who pays for each part of the journey, and most critically, the exact point where the risk for the cargo transfers from the supplier to you.
1. FOB (Free On Board)
Under FOB terms, you as the importer have maximum control over the shipping process. Your supplier, like Intan Seafood, handles all origin country responsibilities, which includes loading the goods onto the shipping vessel you have designated.
Once the container is safely on board that ship, the responsibility and control shift entirely to you. This means you are in charge of contracting the ocean freight, choosing the shipping line, and arranging the cargo insurance policy that meets your specific requirements.
2. CFR (Cost and Freight)
CFR can appear convenient because the seller is responsible for paying the freight costs to bring the goods to your destination port. However, it’s essential to understand the distinction between cost and risk.
Under CFR, the risk for the cargo transfers to you as soon as the goods are loaded onto the ship at the port of origin. Even though your supplier pays for the subsequent ocean journey, you bear the financial risk if anything goes wrong during that transit.
To put it plainly, imagine the reefer container malfunctions mid-journey across the ocean. Under CFR terms, even though your supplier arranged and paid for that shipping, the financial loss for the spoiled cargo is entirely your responsibility.
3. CIF (Cost, Insurance, and Freight)
CIF operates exactly like CFR, with the added requirement that the seller must purchase a cargo insurance policy on your behalf. While this may sound like a comprehensive solution, the details are critical.
The insurance mandated by CIF rules provides only minimum coverage (known as Institute Cargo Clauses ‘C’). This basic policy typically protects against major catastrophes like the ship sinking but does not cover primary risks for frozen seafood, such as spoilage from a reefer container malfunction.
A Direct Comparison FOB vs CIF and CFR
The best choice often comes down to a trade-off between the control you wish to maintain and the convenience you might gain. The table below offers a straightforward comparison from an importer’s perspective.
| Factor | FOB (You Are in Control) | CIF / CFR (Seller Is in Control) |
| Control Over Shipping Line | High: You select the carrier based on reliability and schedule. | Low: The seller chooses the carrier, often based on the lowest price. |
| Cost Transparency | High: You see and approve the actual freight costs directly. | Low: Freight costs are bundled into the invoice, potentially with a markup. |
| Control Over Insurance | High: You choose a comprehensive policy tailored to your cargo’s needs. | Low: You receive a minimal policy that may not cover critical risks. |
| Risk Management | Proactive: You directly manage the most crucial leg of the supply chain. | Reactive: You must depend on the choices made by your supplier. |
Why FOB Is the Recommended Choice for Seafood?
For high-value, temperature-sensitive products like frozen seafood, the control and transparency offered by FOB provide clear advantages that safeguard your investment.
1. Direct Oversight of the Cold Chain
Using FOB allows you to select a premium shipping line known for its reliable reefer container technology and proven service record. This decision is one of the most important factors in protecting the integrity of your frozen products during their long journey.
2. Comprehensive Insurance Coverage
You have the freedom to purchase a comprehensive, “All Risks” (Institute Cargo Clauses ‘A’) insurance policy. This superior coverage is designed to protect against the specific risks your cargo faces, including spoilage from equipment failure, giving you genuine financial protection.
3. Full Cost Transparency
When you arrange the freight yourself under FOB, you have complete visibility into the true costs. This avoids any potential for hidden markups on shipping and insurance that can sometimes be embedded in a CIF or CFR price.
4. Local Representation on the Ground
When you choose FOB, you can appoint your own freight forwarder in the country of origin. This forwarder acts as your trusted representative on the ground, coordinating directly with us at Intan Seafood and ensuring your shipment is handled smoothly until it’s loaded onto the vessel, giving you invaluable oversight.
A Practical Scenario The Value Behind the Cost
Let’s imagine the total final cost to get a container from our facility in Indonesia to your warehouse is nearly identical in both scenarios, around $165,000. The fundamental difference is not the final price, but the value and security you receive for that money.
a. The CIF Scenario You pay a single, all-inclusive invoice. For $165,000, you get the seafood product, shipping on a carrier chosen by the supplier, and a minimal insurance policy that will not cover spoilage from equipment failure.
b. The FOB Scenario You pay a smaller invoice to your supplier for the product itself. You then directly pay for the ocean freight and purchase a comprehensive “All Risks” insurance policy.
For the same total cost of approximately $165,000, you receive the same seafood product, but it is transported on a reliable carrier that you selected and is protected by an insurance policy that truly covers your specific risks.
Making the Right Decision for Your Business
While CIF and CFR offer operational simplicity, this convenience comes at the cost of control over the most critical and highest-risk stage of the shipping process. This can leave an importer exposed to unreliable carriers and inadequate insurance coverage.
For any business importing frozen seafood, the control provided by FOB is a powerful strategic tool. It empowers you to manage costs, mitigate risks, and ensure your product arrives with the quality that you and your customers demand. Ultimately, the best Incoterm is the one that allows you to confidently protect your supply chain.
