Logistics Terms What Are the Differences?
C Term vs F Term

C Terms vs F Terms at a Glance

※ Critical C Term Insight : Even though the seller pays for freight under C Terms, risk still transfers at the point of shipment. Confusing “who pays” with “who bears risk” can create insurance gaps.

Incoterms, an abbreviation for International Commercial Terms, are a way of describing the terms and conditions of commercial transactions by dividing various forms of commercial trade into structured transactions. Incoterms are the internationally accepted terms of trade and are revised every 10 years by the International Chamber of Commerce (ICC). In a trade transaction, there is an exporter and an importer, and the importer pays a cost to the exporter. Incoterms are the terms that distinguish whether the cost paid by the importer includes the price of the goods, freight, and insurance, and the place of delivery at which the responsibility for the risk of the goods, such as customs clearance, is transferred from the seller to the buyer.

Incoterms can be categorized into C Term and F Term based on who bears the main transportation costs. Let's take a look at the characteristics of each term.

C Term : CFR, CIR, CPT, CIP

Among the export incoterms, C Terms require the seller to execute a transportation/insurance contract and bear the freight cost or insurance premium. There are CFR, CIF, CPT, CIP terms where the seller does not bear the risk and additional costs after shipment.

CFR : Cost and Freight

Cost and Freight (CFR) is a freight-inclusive delivery term where the exporter pays all freight to the designated port, and the importer bears all the risk and cost when the goods are transferred across the importer's border. Since the exporter pays the freight to the destination port, risk and cost transfer from the exporter to the importer at different points.

CIF : Cost, Insurance and Freight

Cost, Insurance and Freight (CIF) is a delivery term that includes freight and insurance, and the exporter bears all transportation costs and risks to the destination port. The importer is responsible for the costs incurred in the importing country, and the exporter is responsible for the premiums of marine insurance contracts.

Under CIF, the exporter is responsible for all costs and risks until the goods are loaded on the ship. The exporter must send the necessary documents for shipment as well as other documents such as the certificate of origin that enables the importer to carry out the import procedures.

In addition, ownership is transferred from the time the original bill of lading (OB/L) is lawfully delivered to the importer to the time the cargo is shipped. In other words, the transfer of ownership under CIF is a transfer of ownership by paper.

CPT : Carriage Paid to

Carriage Paid to (CPT) is a delivery term in which the exporter pays all freight costs to the destination, with the exception of customs fees and insurance. The exporter transfers risk to the importer upon delivery of the goods to the carrier.

CPT is similar to but different from CFR in that it can be used on multiple modes of transportation. The destination is determined by agreement between the exporter and importer.

CIP : Carriage and Insurance Paid to

Carriage and Insurance Paid to (CIP) is a delivery term that includes carriage and insurance fee, where the exporter pays all freight and insurance costs to the destination. The exporter arranges and pays for insurance, but is not responsible for any losses. The importer bears the risk to the destination and pays customs fees from the point of destination.

CIP is the same as CIF in that the exporter bears the cost of insurance, but it can be used for intermodal transportation.

F Term : FCA, FAS, FOB

Among the import incoterms, F Terms consist of FCA, FAS, and FOB terms where the seller delivers goods to the buyer from a specific point in the exporting country.

FCA : Free Carrier

Free Carrier (FCA) is a carrier-delivery term, meaning the exporter is responsible for transportation to a designated location after export customs clearance. The importer assumes all costs and risks from the designated location and can specify the location, which can be the exporter's worksite. If it is the exporter's worksite, the exporter is obliged to load the cargo onto the importer's transportation vehicle.

FAS : Free Alongside Ship

Free Alongside Ship (FAS) is a free on board delivery condition, meaning that the importer bears all costs and risks from the time the goods are loaded onto the ship. The exporter bears all the burdens and expenses up to the time of delivery to the ship, which are transferred to the importer after delivery to the ship. The vessel is designated by the importer and is usually used for bulk cargo that cannot be shipped in containers.

FOB : Free On Board

Free On Board (FOB) is where the importer bears all transportation costs and risks from the time the goods are loaded onto the ship. It is the most popular F term, and the exporter is responsible until the goods are delivered on board the vessel as per the contract. Therefore, once the exporter delivers the goods to the domestic port, the importer assumes all responsibility thereafter.

Same as CIF, under FOB, the exporter is obligated to bear all costs and risks until the goods are loaded onto the ship. The exporter is also responsible for sending the necessary documents for shipment, as well as the importer's proof of origin to fulfill import formalities.

FOB requires the importer to pay for the transportation of the goods, including vessel arrangements, sea freight, and insurance. Ownership of the goods is transferred to the importer upon completion of shipment.

When to Use F Terms in Practice

• When the buyer wants to negotiate freight directly and nominate the carrier
• When the buyer prefers to manage cargo insurance independently
• FOB: The most commonly used F Term in Korean export practice

When to Use C Terms in Practice

• When the seller wants to offer a single price (landed cost) including freight
• In Letter of Credit (L/C) transactions where a destination-based price is required
• CIF: Frequently used C Term in trade finance and L/C transactions

FOB · CFR · CIF · FCA at a Glance

Frequently Asked Questions

Q. What is the main difference between C Terms and F Terms?

A. The key difference is who pays for the main freight. Under F Terms, the buyer pays, while under C Terms, the seller pays for freight to destination. However, even under C Terms, risk transfers at the point of shipment, meaning cost and risk are separated.

Q. What is the difference between CIF and CFR?

A. Both are C Terms where the seller pays freight, but as for CIF, seller also pays for insurance. As for CFR, buyer must arrange insurance separately. CIF provides greater protection for cargo.

Q. Which is more commonly used in Korean exports, FOB or CIF?

A. FOB is more widely used in practice. This is because buyers typically prefer to control freight negotiations directly. CIF is mainly used in L/C transactions or when the seller offers a bundled price.

Q. Why does the buyer bear the risk under C Terms even if the seller pays freight?

A. This is a defining feature of C Terms. The seller pays for freight, but risk (liability for damange, loss) transfers to the buyer once the goods are loaded on board. Therefore, unless using CIF, the buyer should arrange separate cargo insurance.

Q. When should FCA be used instead of FOB?

A. FCA is more suitable for air freight or multimodal transport, as FOB applies only to sea transport. Additionally, under Incoterms 2020, FCA includes provisions allowing the seller to obtain a Bill of Lading (B/L) for L/C transactions, making it an increasingly recommended alternative to FOB.