EXW vs FOB vs CNF: Which Trade Term Should an Importer Choose?
By Elaff Trade Co.Published 6 min read
EXW, FOB and CNF are trade terms that say who arranges and pays for transport, and where the risk passes from seller to buyer. EXW leaves almost everything to the buyer, FOB hands over at the loading port, and CNF has the seller pay freight to the destination port.
What the terms are
The terms come from the Incoterms rules published by the International Chamber of Commerce. The current edition is Incoterms 2020. They cover three things: who does each part of the delivery, who pays for it, and when the risk of loss or damage passes to the buyer. They do not decide when the buyer pays or who owns the goods, which are set in the sales contract.
"CNF" is trade shorthand for CFR, meaning Cost and Freight.
EXW, FOB and CNF side by side
| EXW (Ex Works) | FOB (Free On Board) | CNF / CFR (Cost and Freight) | |
|---|---|---|---|
| Seller's job | Makes the goods available at its premises | Delivers the goods on board the ship at the loading port, and clears them for export | Delivers the goods on board and pays the sea freight to the destination port |
| Buyer's job | Loading, export clearance, all transport, insurance and import clearance | Sea freight, insurance, import clearance and delivery | Insurance, unloading and import clearance, plus delivery from the port |
| Risk passes | At the seller's premises | When the goods are on board the ship | When the goods are on board the ship at the loading port |
| Best for | Buyers with their own agent in the seller's country | Buyers who want to control and compare freight prices | Buyers who want the seller to book the freight |
The important detail in CNF
Under CNF the seller pays for the sea freight, but the risk still passes at the loading port. That means damage at sea is the buyer's risk, and the seller is not required to buy insurance. If you buy on CNF, arrange cargo insurance yourself. If you want the seller to arrange it, ask for CIF, which is CNF plus minimum insurance.
A note on containers
FOB, CFR and CIF are written for goods carried by sea and inland waterway. The International Chamber of Commerce suggests the terms FCA, CPT and CIP for containerised cargo that is handed over at a terminal. Many buyers and sellers still use FOB and CNF for containers, and it works, but be clear about the exact port and who pays each charge.
How to choose
- You are new to importing and have no freight forwarder: CNF is the simplest, since the seller books the freight. Add insurance.
- You have a forwarder or want to compare freight prices: FOB lets you choose the carrier and control the cost.
- You have an agent who can handle export clearance in the seller's country: EXW can work, but it puts the most responsibility on you.
- You ship frozen or fresh goods: think about who sets and monitors the temperature, and who claims if it fails. Our guide to shipping frozen food internationally explains the cold chain.
- You ship dry goods such as confectionery: there is no cold chain to protect, so speed and who books the freight decide the choice. See our confectionery collection.
An example: frozen chicken to a Gulf port
Imagine a distributor in Dubai buying a container of frozen chicken for delivery to a Gulf port such as Jebel Ali:
- On EXW, the distributor's agent collects the goods from the seller's cold store, loads them, clears them for export, books the reefer and the ship, insures the cargo and clears it on arrival.
- On FOB, the seller loads the goods and clears them for export, and the distributor books the freight and insurance, then clears the cargo on arrival.
- On CNF, the seller books the sea freight to the Gulf port. The distributor still insures the cargo and clears it on arrival, and the risk is still the distributor's from the moment the goods are on board.
The same container, the same product and the same ship can be bought on any of the three. What changes is how much of the work, and how much of the risk, the buyer takes on.
Costs the term does not cover
No trade term includes everything. Plan for import duty and taxes, customs broker fees, port and terminal charges, container detention, cold storage and delivery from the port. Our guide to starting small gives a checklist.
Terms we work on
We work on EXW, FOB or CNF terms, with warehousing, labelling in your language, international logistics and customs clearance available. For example, our Valencia mandarin listing is quoted FOB Qingdao with CIF and CNF supported. We deliver to importers across the Gulf, the UK, the USA and South Africa. Browse the frozen foods and food and beverages collections, then ask us which term suits your order, or send us an inquiry with your product and destination port. You can also read how to check a supplier before you agree terms.