CIF vs FOB for Copper Scrap: Which Incoterm Should You Buy On?

Every copper scrap offer carries three letters after the price, and those letters decide who books the ship, who pays for it, who insures the cargo, and when a lost or damaged container stops being the seller's problem. FOB and CIF are the two terms you will see most often on export offers, with CFR in between. They look like pricing conventions. In practice they are risk allocations, and buyers who treat them as interchangeable tend to learn the difference at the worst possible moment. This guide explains each term as it applies to a container of copper scrap leaving a US port, what is and is not included, and how to compare offers made on different terms.

The three terms in one table

All three are Incoterms® rules published by the International Chamber of Commerce, currently in the 2020 edition. All three are "sea and inland waterway" terms, and in all three the seller clears the goods for export. The difference is how far the seller's costs extend, which is not the same as how far the seller's risk extends.

Read the "when risk passes" row twice. It is identical across all three terms. That is the single most important fact on this page.

FOB: you control the freight

Under FOB Port Everglades, the seller's job is to deliver the copper, cleared for export, loaded on board the vessel you nominate. From the moment the container is on board, the cargo is at your risk and the freight is your cost. You choose the carrier, negotiate the rate, receive the arrival notices and deal with the destination agent.

FOB suits buyers who already ship regularly out of the US East Coast and have a forwarder with good contract rates. It also suits buyers whose bank, government or internal policy requires them to buy freight and insurance locally, which is common in several import markets. Its weakness is coordination. The seller cannot load until your forwarder has secured a booking, released empty containers and confirmed the cut-off. If your booking slips, the copper sits waiting, and any storage or re-booking costs are something you will want to have allocated in the contract in advance.

CFR: the seller books, you insure

CFR moves the freight booking and cost to the seller, up to the named destination port. Risk still passes at origin when the goods are on board. CFR is a sensible middle ground for buyers who would rather not manage an ocean booking out of Florida but who already have an annual marine cargo policy that covers all their inbound shipments. Insuring under your own open policy is often cheaper and broader than the minimum cover a seller buys under CIF.

CIF: freight and minimum insurance included

CIF is CFR plus marine insurance bought by the seller for the buyer's benefit. Two details matter more than the headline:

• Minimum cover only. Under Incoterms 2020, CIF requires the seller to buy only the minimum level of cover, Institute Cargo Clauses (C), for at least 110% of the contract price. Clauses (C) cover major casualties such as fire, sinking, stranding and general average. They do not cover theft or many forms of damage that an all-risks policy, Institute Cargo Clauses (A), would. If you want (A) cover, write it into the contract.
• Risk still passes at origin. CIF does not mean the seller is responsible until the copper reaches your port. If a container is lost at sea, you as buyer bring the claim, using the insurance certificate the seller handed over with the shipping documents.

CIF is popular with first-time importers, with buyers whose banks issue letters of credit on CIF terms by default, and in lanes where the seller can book freight on better terms than a single importer can. It is also the term many destination customs authorities value duty on, which is useful when you are estimating landed cost.

What a CIF price does not include

Buyers comparing a CIF offer with their own landed-cost budget are regularly surprised by the costs that sit after the destination port. Under all three terms the buyer normally pays:

• Destination terminal handling and port charges, unless the seller's carriage contract expressly includes them.
• Import duties, VAT or GST and any scrap levies, which in many countries are calculated on the CIF value.
• Customs brokerage and any import licence or pre-shipment inspection certificate the destination requires for scrap.
• Demurrage and detention once the carrier's free time runs out. Scrap containers held for inspection or a missing licence can run up these charges quickly.
• Inland haulage from the port to your plant.

None of these are hidden by the seller. They simply fall outside the term. Ask your broker for a destination cost estimate per container before you compare offers.

How to compare an FOB offer with a CIF offer

Copper scrap prices are built from the LME copper price less a grade-based margin, so the metal value is the same whichever term the offer uses. What changes is the logistics layer stacked on top of it. To compare like with like:

1. Take the FOB offer and add your own ocean freight quote to the same destination port, for the same number of containers and the same sailing window.
2. Add your insurance premium at the level of cover you actually want, (A) or (C).
3. Add your forwarder's documentation and booking fees.
4. Compare that total with the CIF offer, adjusted for any difference in insurance cover.

If the numbers are close, choose on control and convenience. If you have strong freight rates, FOB usually wins. If you are a first-time or occasional importer, CIF or CFR usually saves both money and coordination effort. The pricing layer underneath is explained in how copper pricing works.

Incoterms and letters of credit

If you are paying by L/C, the Incoterm drives the document list. A CIF credit will call for an insurance policy or certificate, and under the ICC's UCP 600 rules that document must normally cover at least 110% of the CIF value unless the credit says otherwise. A CFR or FOB credit will not call for insurance from the seller, so the buyer arranges it separately. The bill of lading also changes. Under CFR and CIF it is usually marked "freight prepaid"; under FOB, "freight collect". A mismatch between the Incoterm in the credit and the freight notation on the bill of lading is a classic discrepancy that delays payment, so agree the term before the credit is drafted. Our letter of credit guide walks through the full document set.

What about containers and FCA?

The ICC itself notes that FOB, CFR and CIF were written for goods handed over at the ship's rail, and recommends FCA, CPT and CIP when goods are delivered to a carrier at a container terminal before loading. Much of the metals trade still contracts container shipments on FOB and CIF terms by long-standing convention, and banks and customs authorities are used to them. If your company's policy or your bank prefers the container-specific terms, we can quote on that basis. Just say so at the enquiry stage so the contract, the credit and the bill of lading all match.

How Atlas Copper quotes

Our standard term is FOB Port Everglades, or PortMiami, with CFR or CIF to a nominated destination port on request. On CFR and CIF offers, the metal price, the freight and the insurance appear as separate lines, so you can see exactly what you are paying for and compare it with your own freight quote. The minimum export order is 5 × 20ft containers, roughly 110–120 metric tonnes, which is also the point where an ocean booking and an inspection visit make economic sense. Independent pre-shipment inspection by SGS, Bureau Veritas or Cotecna can be written into any of the three terms. How much copper fits in each box is covered in the container loading guide, and the full purchase sequence is in how to buy copper scrap in bulk for export.

Frequently asked questions