FOB, CIF or CFR: Choosing Incoterms for a Steel Order from China

The term on your purchase order decides who books the ship, who pays which charge, and — the part most buyers discover too late — the exact moment your steel stops being someone else's problem. Here is how FOB, CFR and CIF really differ on a steel order, and where the standard wording leaves you exposed.

Why the term matters more on steel than on most cargo

Steel is dense, and density changes the argument. A 40ft high cube of bundled tube or plate runs into the high twenties in tons — a weight that is legal inside the container and often illegal on the road once it leaves the destination port. Add strap marks, rust from a week of condensation, and bundles that have to be handled with the right gear, and you have a shipment where the Incoterm is not paperwork: it decides who is standing next to the container when something goes wrong.

Three things move under every term, and they do not always move together: cost, risk, and control. Most disputes start because a buyer assumed all three followed the same route.

The five terms that cover almost every steel order

Notice what is identical in three of those rows: under FOB, CFR and CIF the risk passes at the same moment — on board at the load port. Only the invoice and the booking change.

The part buyers miss: cost and risk travel separately

Under CIF the supplier books the vessel and buys the insurance, so it feels like the supplier carries the shipment to your door. It does not. The risk is yours from the moment the bundles are lashed on board. If the container arrives with two tons of water damage, you are claiming on a policy you did not buy, arranged at the minimum cover the term allows.

That minimum matters on steel specifically. The usual CIF wording calls for Institute Cargo Clauses (C) — the narrowest of the three standard covers. It responds to total loss and to major casualties: a vessel grounding, a container going over the side, a fire. It is not built for the failures a steel cargo actually suffers: condensation inside the container as it crosses climate zones, wetting through a damaged door seal, handling damage at the transshipment port, and shortage discovered at destination.

So the practical rule for CIF: ask for the insurance certificate before the vessel sails, read which clauses it names, and check the insured value and the deductible. If the answer is clauses (C) at the invoice value, you are holding a policy for catastrophes, not for rust. Many experienced buyers pay a little more for clauses (A) or simply take CFR and insure the cargo themselves — then they own both the risk and the remedy.

Where the standard wording leaves gaps

Incoterms allocate the big items. The charges that generate arguments sit in the seams between them, and they belong in the contract:

• Origin terminal handling and documentation fees — often billed separately from ocean freight, and frequently excluded from a CIF or CFR figure.
• Container cleaning and inspection — a steel container comes back with rust dust and strap residue, and some carriers charge for it.
• Heavy-lift and over-length surcharges — a 12 m bundle in a 40ft box is normal for us, but the destination handling can still attract a surcharge.
• Demurrage and detention — free days start when the container is discharged, not when your customs broker gets around to it. Under CIF this is your cost even though the supplier booked the box.
• Survey and inspection — a joint survey at destination, or a third-party inspection at loading, is a separate line unless you write it in.

Which term suits which buyer

What to write on the purchase order

Documents that should travel with a steel shipment

1. Bill of lading (or sea waybill) — check the consignee, the notify party, and the description against the invoice.
2. Commercial invoice and packing list — with bundle count, pieces per bundle, and gross and net weight per bundle. On steel, the packing list is the document you will actually argue with.
3. Mill test certificate — per heat number, matching the grade on the order.
4. Certificate of origin — where a preferential tariff applies, the format matters more than the content.
5. Insurance certificate — under CIF, endorsed so you can claim in your own name.
6. Loading photos and the weighbridge ticket — not a customs document, but the fastest way to end a weight or damage dispute.

How we handle terms at our end

Our standard offer is FOB Nansha or FOB Shekou, because that keeps the booking in the buyer's hands and the loading record in ours. Where a buyer asks for CFR or CIF to a destination we can serve, we quote it — with the freight shown as an estimate until the booking is confirmed, since ocean rates and sailing schedules move weekly and a number given before booking is not a commitment. What we do commit to is the loading record: bundle tags, piece counts, weighbridge ticket and photographs of the container being closed, sent with the documents.

If your order is cut to length, the cutting and the packing happen before the container is booked, so the term has to be agreed at the enquiry stage, not after the material is on the floor. Details on galvanized square tube, steel plate, angle steel and H-beam, and a worked example of how a mixed load is packed in our container loading guide.

Incoterms allocation, insurance clauses and surcharge responsibility are confirmed against each purchase list and the edition of Incoterms named on it. This article describes standard practice for orientation and is not legal or insurance advice.

Tell us the destination, not just the size

Send your purchase list with section, grade, quantity, destination port and the term you want to work on, and we will reply with the itemized weights and a quotation stated on that basis. Send your purchase list →