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.