Almost every Australian importer has been offered a CIF price by an overseas supplier, and most have accepted it at least once. It looks simple: the supplier organises the freight, quotes you a landed-at-the-port number, and you have one less thing to manage. In practice, CIF is frequently the most expensive way to buy freight, and the reason is structural rather than dishonest.
What CIF actually commits you to
Under CIF the seller arranges and pays for carriage to the named destination port and provides minimum insurance cover. Risk in the goods, however, transfers to you when the goods are loaded on board at origin. So you carry the risk for the entire ocean voyage while somebody else chose the carrier, the routing and the insurance.
Where the money goes
When your supplier controls the freight, their forwarder appoints an agent in Australia. That agent is not paid by you and does not compete for your business, but it is the party that invoices you for destination charges: terminal handling, documentation, deconsolidation, agency fees, and sometimes charges with names you have never seen before. Because the origin rate was quoted competitively to win the supplier’s business, the margin is recovered at the end of the chain where nobody is shopping around.
The result is a shipment where the visible number was low and the invisible number was not. Our guide to freight costs lists every charge that can appear.
What changes on FOB
Under FOB, your supplier delivers the goods on board the vessel and their responsibility ends. You appoint the forwarder. That single change gives you four things:
- Visibility. Every charge from the ship’s rail to your door is quoted to you in advance.
- Leverage. Your forwarder competes for your ongoing business, not your supplier’s.
- Control of clearance. Your broker prepares the entry, which means classification and free trade agreement claims are handled by someone accountable to you.
- Better sequencing. Because the same party holds the freight and the customs work, the entry can be lodged pre-arrival, protecting your free storage days.
How to make the switch
It is a purchasing conversation, not a freight one. Ask your supplier for an FOB price alongside their CIF price. The difference is what they are charging you for the freight portion. Then ask us to quote the same shipment from FOB, and compare total landed cost rather than headline rates.
Most suppliers are entirely comfortable with FOB — it is less work for them. Occasionally a supplier resists, which is usually a signal that the freight margin matters to their pricing.
When CIF is genuinely fine
CIF can make sense for very small one-off shipments where the administrative simplicity outweighs the cost, or where you have negotiated a total delivered price you are happy with and have verified there are no additional destination charges. The test is simple: ask, in writing, “will I receive any invoice from anyone other than you?”
And a word on DDP
DDP looks even easier because duty and GST are included. But you remain the importer in substance, and you are relying on a declaration made on your behalf that you never see. If a classification or valuation is wrong, the exposure lands with you, potentially years later. If a supplier insists on DDP, ask for a copy of the import declaration.
Read Incoterms explained for the full comparison, or send us your supplier’s quote and we will tell you exactly what you are buying.