CIF - Cost, Insurance and Freight

What is the CIF Incoterm (Cost, Insurance, and Freight)

The CIF Incoterm is only applicable for maritime shipping and for one mode of transport. If several transport options are going to be used in the shipment, the CIP Incoterm should be used instead.

The CIF Incoterm obligates the seller to deliver the goods to the port selected by the buyer. The risk transfer point is at the moment the goods are loaded to the shipping vessel, which is why it’s recommended that this Incoterm is used when the seller has access to the vessel and can ensure that the goods are properly loaded.

With that, the CIF is not suited for containerized cargo. The risk transfer point and cost transfer point differ in CIF, which creates a grey area between the time the goods are dropped off in container terminals and loaded onto a vessel. If the goods get lost or become damaged, it will be difficult to pinpoint liability. If the subject cargo is containerized, it’s recommended to use the CIP Incoterm instead.

The Seller’s Obligations Under the CIF Incoterm

• Delivery of goods and the documents required
• Contract of carriage
• Transport-related security
• Checking, packaging, marketing
• Bear all risks of loss of or damage to the goods until they have been delivered
• Custom handling fees
• Export clearance
• Insurance
• Notify the buyer that the goods have been delivered

The Buyer’s Obligations Under the CIF Incoterm

• Payment for the goods
• Take the delivery of the goods
• Bear all risks of loss of or damage to the goods from the time they have been delivered
• Import clearance
• Custom handling fees
• No obligation to make a contract of carriage.

Mandatory Insurance Under the CIF Incoterm

Under the CIF Incoterm, the seller is contractually obligated to obtain insurance for the goods during transport. It’s one of two Incoterms that provides mandatory insurance, the other being the CIP Incoterm.

The seller must obtain insurance that covers the price of the goods plus 10%. If the buyer wishes to procure additional insurance, they may do so although they have no obligation to. If the buyer can contract better cargo insurance coverage than the seller can provide, it’s recommended that they use the CFR Incoterm instead.

What Does the Seller Pay For Under the CIF Incoterm?

• All costs relating to the goods before they are delivered
• Freight
• Loading costs
• Transport-related security requirements
• Charges for unloading, if for the seller’s account under the contract of carriage
• Costs of transit, if for the seller’s account under the contract of carriage
• Costs of providing usual proof
• Insurance coverage
• Duties and taxes

What Does the Buyer Pay For Under the CIF Incoterm?

• All costs relating to the goods from the time they are delivered
• Costs of transit
• Unloading costs
• Costs of additional insurance, if preferred
• Duties and taxes

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