Incoterms: CIF – Cost, Insurance and Freight

Posted by Posted date Education Incoterms 2000 10 comments

CIF

CIF “Cost, Insurance and Freight” is a very commonly used incoterm. This is another incoterm that officially is not supposed to be used for air shipments, but I have seen its usage in both air and ocean shipments. Officially CIF is only to be used for ocean or inland waterway transport. CIF is basically the same as CFR except that it includes insurance as well as cost and freight.

In CIF, the seller/exporter arranges for the goods to be delivered to the named port of destination. However, unlike CFR, the seller’s risks do not end until the moment the goods have passed the ship’s rail at the named port of destination. The seller is responsible for all costs until the goods have been unloaded at the named port of destination. In this case, the named port of destination is domestic to the buyer, meaning that the named port must be a port in the buyer’s country. For example, if I was exporting cherries to Thailand and the port of destination was Laem Chabang, I would sell it based on “CIF Cost, Insurance and Freight Laem Chabang, Thailand”.

Under CIF terms, the seller’s risks end the moment the goods pass the ship’s rail at the named port of destination, but the seller is responsible for all costs up to the named port of destination :
Seller’s Responsibilities:
1) Produces the goods and commercial documents as required by the sales contract.
2) Arranges for export clearance and all export formalities.
3) Arranges and pays for all costs for the transportation of the goods up to the named port of destination.
4) Assumes all risk to the goods (loss or damage) only up to the point they have been carried to the port of destination and ends the moment the goods pass the ship’s rail at port of destination.
5) Seller must advise the buyer of the location and time that goods have been delivered onto the named vessel.
6) Seller has to provide the buyer with transport documents that will allow the buyer to take possession of the goods at the named port of destination.
Buyer’s Responsibilities:
1) Buyer must pay for the goods as per the sale contract
2) Buyer must obtain all commercial documentation, licenses, and authorizations required for import and arrange for import clearance and formalities at own risk and cost.
3) Buyer takes delivery of the goods after they have been delivered by the seller to the named port of destination.
4) Buyer must assume all risks for the goods from the time the goods pass the ship’s rail at port of destination to delivery into the buyer’s warehouse or other specified location. SPECIAL NOTE: While the seller is obligated to insure the goods and is legally responsible for the goods up to the port of destination, the buyer may have a vested interest in the goods during the voyage. It may be a wise decision for the buyer to purchase additional insurance coverage in the case of a loss.
5) Buyer pays for all costs of transportation, import customs formalities and duty fees, and all other formalities and charges related to the transportation of the shipment from the time the goods have been delivered to the named port of destination.
6) Buyer would accept the seller’s transport documents provided they conform with the sales contract and will allow the buyer to take possession of the goods after arrival at the named port of destination.

This interpretation is provided as a guide only.

Incoterms are published by the International Chamber of Commerce and are available on their website and official publication “Incoterms 2000″. For a complete and official overview please refer to the ICC’s publication.

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  • Tina October 6, 2008 4:14 am edit

    Hi! Can yiu tell me the difference of CIF and CIP?

  • 3plwire October 7, 2008 3:52 pm edit

    Check out our explanation of CIP here:

    http://www.3plwire.com/2006/08/04/incoterms-cip-carriage-and-insurance-paid-to/

    CIF and CIP are very similar incoterms, with CIF the more commonly used term. However, based on my understanding, CIF should only be used for ocean or inland waterway shipments. CIP, on the other hand, can be used for any mode of transport.

    Other than that, the main difference, again based on my understanding, is that with CIF the seller’s responsibilities end the moment the goods pass the ship’s rail at the named port of destination, while with CIP the seller’s responsibilities end once the goods have been delivered to the port of destination, but the port of destination may not necessarily be the end delivery point – it could be an agreed upon point at the port of destination.

    These interpretations are provided as guides only.

  • Ahmed April 12, 2010 3:03 am edit

    Question:

    Dear Sir,
    Thanks for the guiding information…

    I have a question,Are u sure that the seller is responsible for all costs until the goods have been UNLOADED at the named port of destination.?

    i.e. If the seller has to arrange for unloading the vessel was confirmed ,then the buyer shall not pay for the Demurrage if there will be any since the seller has to arrange for unloading by himself.

    Can you confirm this please.

    BR

    Ahmed

  • S.P.Suvarna May 5, 2010 7:48 am edit

    Seller will ship the goods by air and buyer take of insurence part till destination port, the buyer will pay air freight charges, port clearance, customs duty and transportation.
    What incoterms can be used for this import.

  • danson May 9, 2011 11:51 pm edit

    ex-works

  • treza August 19, 2011 4:07 am edit

    If shipper send documents late and cargo incurred storage charges as port of destination, and terms of cargo is CIF Kigali, who pays for the extra charges incurred? Treza

  • k patnaik September 20, 2011 3:59 am edit

    if the transaction of import is on CIF basis, what is the treatment of berthing charges, who should pay it, the seller or the buyer

  • S Gallant July 18, 2012 8:28 am edit

    When purchasing cif and a dispute airises on the specifications of goods received and the cargo insurers survey representative tests and completes a report to the insurer, does the buyer have a right to revieve a copy of the report?

  • siva August 4, 2013 2:45 am edit

    If the vessel has sank while in transit who will be responsible to claim the insurance

  • Kishor Bhosale September 26, 2013 6:56 am edit

    Dear Sir,

    My term of shipment is: Completion of shipment within 17 months on CIF XXXXX port (INCOTERM 2010). Material is going to be send from India.

    In this case, as per INCOTERM 2010 cost insurance and freight upto purchaser’s country in my scope.

    Shipment time mentioned is for completion of shipment of goods from Indian Port.

    Please comment on my Understanding.

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