CIF vs FOB in sugar trade is a recurring debate, especially when new buyers try to negotiate shipping terms for ICUMSA 45 sugar. But most experienced sellers will only entertain CIF — and reject FOB outright.

Here’s why.

What’s the Difference Between CIF and FOB?

1. FOB (Free on Board):
   The seller loads the cargo, but the buyer takes over all responsibility (shipping, insurance, logistics) once it’s on board.
2. CIF (Cost, Insurance, Freight):
   The seller covers freight, insurance, and logistics up to the destination port, retaining control over the entire shipment process.

At first glance, FOB may look flexible for the buyer — but for the seller, it introduces serious operational and financial risks.

Why Sugar Sellers Avoid FOB

1. Unreliable Vessel Scheduling. Under FOB, the buyer must send their vessel on time and ensure it matches port and loading requirements. In reality, many don’t — causing delays, port congestion, or even ship rejection.
2. Demurrage & Storage Risks. When vessels are late, the sugar sits idle. Sellers are left paying for warehouse storage or demurrage fees. In monthly contracts, this creates a compounding logistics mess.
3. Loss of Control. With CIF, the seller chooses a trusted shipper, arranges insurance, and manages the flow end-to-end. With FOB, all that control is gone — and so is shipment reliability.
4. Banking & Documentation Issues. CIF allows the seller to issue a full set of transport documents (BL, insurance, invoice) that are essential for triggering SBLC or DLC payment. FOB disrupts this flow — and that jeopardizes financing.

Real-World Impact: The Bottleneck Problem.

Let’s say a seller agrees to a 100,000 MT/month FOB contract. The buyer’s vessel is delayed by 5 days. Now the seller:

1. Can’t ship the current cargo
2. Can’t receive new production
3. Has to store both old and new batches

This chain reaction causes port congestion, missed deadlines, increased risk — and potential breach of contract.

Why CIF Protects Both Sides

CIF isn’t just about seller control — it’s about mutual protection:

1. The seller ensures logistics and documentation are in sync
2. The buyer gets a cleaner, more secure transaction
3. Banks receive full documents for financing
4. Deadlines are managed with fewer surprises

That’s why experienced sugar sellers rarely accept FOB unless the buyer has proven capacity, credibility, and port control — and even then, it’s case by case.