FOB versus CFR for commodity buyers

FOB and CFR are the two terms most commonly used for containerised and bulk commodity trade out of Indonesia. The distinction matters for cost, for control, and for who is exposed if something goes wrong in transit.

What each term covers

Under FOB, the seller delivers the goods on board the vessel at the named port of shipment. The buyer arranges and pays for carriage from that point. Under CFR, the seller arranges and pays for carriage to the named destination port — but risk still transfers when the goods are on board at origin.

The point that surprises buyers most often: under CFR the seller pays the freight, but the risk of loss in transit still sits with the buyer from the moment the goods are loaded at origin. CFR is not CIF, and neither includes insurance cover for the buyer unless it is separately arranged.

When FOB tends to suit the buyer

• You have freight rates through your own forwarder that beat what the seller can obtain
• You want direct control over the carrier, the routing and the schedule
• You are consolidating shipments from several origins
• You want visibility of the actual freight component rather than a bundled figure

When CFR tends to suit the buyer

• You prefer a single landed figure to the destination port for internal costing
• You do not have established freight arrangements at the origin
• The volume is too small to obtain competitive rates independently
• You want the origin-side coordination handled as one package

Compare like for like

An FOB price and a CFR price are not directly comparable. Add your own freight, and any origin charges you would carry under FOB, before deciding which offer is better. A CFR number that looks higher can be the cheaper outcome once your freight is included — and the reverse is equally common.