FOB vs CIF: A Worked Cost Breakdown for African Commodities

At a glance

• On an illustrative 20-ft container of sesame worth about US$22,500, the gap between an FOB and a CIF invoice is roughly US$1,100–1,600 — ocean freight plus marine insurance.
• Under both terms the seller pays inland haulage, export clearance and origin port charges; those lines never move.
• CIF shifts two line items — freight and insurance — onto the seller's invoice. It does not shift risk: the voyage is the buyer's risk under both terms.
• Marine insurance is small money — typically a fraction of one per cent of cargo value, around US$100 on this container.
• FOB tends to win for buyers with their own freight contracts; CIF wins for first orders and buyers without a forwarder near the origin.
• The most common dispute is not price: it is a CIF buyer discovering that mid-voyage damage is their insurance claim, not the seller's reshipment problem.

Our Incoterms guide, linked below, covers what FOB, CIF, CFR and EXW mean. This post does the arithmetic instead: one container, every cost line, both terms. Every number below is ILLUSTRATIVE — rounded, plausible figures for a normal freight market, chosen to show the structure of the cost stack. Actual costs move with the season, the route and the freight cycle, which is exactly why the structure matters more than the numbers.

What is the worked example?

Take one 20-foot container holding 15 tonnes of bagged Tanzanian natural white sesame at an illustrative US$1,500 per tonne, trucked from an up-country warehouse and shipped through Dar es Salaam to an Asian destination port. The same stack applies to raw cashew nuts or cashew kernels out of Mtwara — only the numbers change, never the categories.

• Goods value: 15 t × US$1,500 = US$22,500 — the lab-tested, export-packed commodity itself.
• Inland haulage to the port: about US$500–900, depending on the distance from the growing region.
• Export clearance, documentation and port/terminal charges: about US$500–800 all-in, certificates included.
• Ocean freight for a 20-ft box to a major Asian or Gulf port: about US$1,000–1,500 in a normal market; North Europe typically runs higher.
• Marine insurance at roughly 0.4 per cent of insured value: about US$100 on this cargo.

What does the buyer pay under FOB?

Under FOB Dar es Salaam, our invoice bundles the goods, the inland haulage and the origin charges — illustratively around US$24,000 for this container, delivered on board and cleared for export. The buyer then books and pays ocean freight (US$1,000–1,500) and insurance (about US$100) directly, through their own forwarder and their own policy. The landed total is the same money; the difference is that the buyer sees and controls every leg beyond the ship's rail.

What changes under CIF?

Under CIF, freight and insurance move onto our invoice — illustratively US$25,100–25,600 to the named destination port. Physically, nothing about the shipment changes. Commercially, two things do: the buyer writes one cheque instead of three, and the seller has quoted a freight forecast inside the commodity price. Legally, one thing does not change, and it is the clause buyers misread most: risk still transfers when the goods are loaded at Dar es Salaam, so cargo damaged mid-voyage is the buyer's claim against the insurance policy we bought on their behalf.

When does each term win?

• FOB wins for regular importers with carrier contracts — their freight rates usually beat ours, and they keep control of routing and transhipment.
• FOB keeps quotes comparable: with freight stripped out, two suppliers' prices are the same kind of number.
• CIF wins on first orders into an unfamiliar route, when one all-in number to the destination port is worth a margin on the freight.
• CIF suits buyers with no forwarding relationships near East Africa — the seller's freight desk becomes theirs.
• CFR is the halfway house: the seller books the freight, the buyer runs the cargo through their own annual insurance policy.

Where do FOB and CIF disputes actually start?

• The freight forecast inside a CIF price: if the market moves after fixing, a squeezed seller may economise with a slower transhipment routing — agree the routing class, not just the price.
• Insurance level: CIF only obliges minimum cover, so the contract should name the clause level (all-risk versus basic) and the insured value basis, typically 110 per cent of the CIF value.
• The risk misread: under CIF, mid-voyage loss is settled between the buyer and the insurer — pursuing the seller instead burns weeks and goodwill.
• Destination charges: both terms end before destination port handling, customs and delivery — a 'CIF surprise' at arrival is usually a cost that was never the seller's to pay.

“A CIF quote is an FOB quote with a freight forecast hidden inside it. We will happily make that forecast — we just prefer the buyer to see it as a line item rather than a mystery.”

— Daniel Mahenge, Logistics Coordinator

Our default remains FOB Dar es Salaam or FOB Mtwara, with CFR and CIF quoted on request — ask for both numbers side by side and the freight line makes itself visible. And to repeat the label one last time: the figures above are illustrative. For a live stack against your port and volume, the quote is the only number that counts.