FOB and CIF Transport Costs
Freight-on-Board (FOB) cost structures involve the production cost
plus any transport costs for the consignment to reach the customers. This implies that customers
located nearby will have a lower overall cost than customers that are
further away. Under the Cost-Insurance-Freight (CIF) cost structure,
every consumer is charged the same price, which commonly reflects the
average transport cost. Customers located close to production are "subsidizing"
the costs paid by customers located further away. This price structure
is common for consuming goods.