definition, used by a seller to indicate that the price quoted includes the cost of the merchandise, packing, and freight to a specified destination plus insurance charges. Following the terms in the sales contract, once the goods change hands, the buyer must pay the agreed price and must, now, cover any additional transportation, inspection, and licensing costs. CIF applies to ocean or inland waterway transport only. Consider this hypothetical example: Best Buy orders 100 containers of flat-screen televisions from Sony using CIF to Kobe, a Japanese port. Ex works (EXW) is a shipping arrangement in international trade where a seller makes goods available to a buyer, who then pays for transport costs. CIF means, Cost, Insurance and Freight (paid up to the destination mentioned). CIF is only used for sea or inland water-based transport and is unsuitable for containerized cargo or fresh product shipping. The buyer will then assume all further responsibilities, including those relating to cost once the ship has reached port. The advantage to the seller is that it can often obtain cheap insurance and then build a larger amount into its selling price. For containerised goods, consider ‘Carriage and Insurance Paid CIP’ instead. C.i.f. Under CIF, the seller is contractually obliged to provide insurance for the transport of the goods. The transfer of risks also takes place at that time, in other words, the critical point of costs is equal to the critical point of risk transfer, just like FOB. As with CFR and CIF, these terms can be less favourable for buyers, meaning less control and unexpected fees. This is because unlike CIF, insurance isn’t a seller’s obligation under CFR and can also be acquired by the buyer. CIF is considered a more costly option when buying goods whereas FOB shipping relieves the seller of responsibility once the goods are shipped. Free carrier is a trade term requiring the seller to deliver goods to a named airport, shipping terminal, or warehouse specified by the buyer. They are identical apart from an additional marine insurance policy paid for by the seller. CIF stands for "cost, insurance and freight" in shipping. CIF-Cost, Insurance and Freight "Cost, Insurance and Freight" means that the seller has the same obligations as under CFR but with the addition that he has to procure marine insurance against the buyer's risk of loss of or damage to the goods during the carriage. This rule too dates back to the early days of international shipping an is largely unchanged since then. With letters of credit, just as for FOB and CFR, the banks seem to have no problem, except they sometimes make a complete mess of the insurance clause. CNF is similar to CIF, except insurance is not included. The same shipping terms as CFR, plus a marine insurance policy also paid by the seller. There is a difference between CFR and CIF, which is that there is one additional responsibility on the seller. When dealing with containerized cargo, CIP is the recommended alternative to CIF. The detailed articles on CIF and DDP with simple language have been mentioned in this web blog separately. Let’s break down the steps and explain to you where things start going wrong and why. There is a difference in the risks associated with each of these arrangements though. Together with CIP, these are the only two Incoterms that stipulates that insurance must be provided by the seller. In most cases, the seller's obligation ends once cargo loading is complete. International Shipping CIF acronym meaning defined here. If the buyer considers that this level of cover is not sufficient, an agreed level of cover can be included elsewhere in the contract of sale. See more. However, risk is transferred to the buyer once the goods are loaded on the ship. CIF is one of the international commerce terms known as Incoterms. CIF is one of the international commerce terms known as Incoterms. Even though the seller pays for insurance during the main carriage, the risk is transferred to the buyer at the time the goods are on board. CIF is a conventional method of shipping goods for importers. If the freight is containerized and delivered only to the terminal, use CIP instead. The difference between CIF and CFR is that while the risk of loss or damage at delivery becomes the buyer’s, the seller is obliged to take out insurance for that risk and provide the buyer with a document which allows the buyer to claim against that insurance. When the goods arrive there, you’ll have to organise customs clearance and delivery to your home/office/warehouse. The seller assumes the responsibility for all of the arrangement and transportation costs for shipping products to the agreed upon destination port. Under CIF, the seller is responsible for the cost and freight of bringing the goods to the port of destination specified by the buyer. CIF – Cost, Insurance and Freight. Click below to fill in our quick and easy registration form. The transfer of costs will occur after placing the goods on board of the ship in the port of departure or after the goods are loaded. Under CIF, the seller is responsible for the cost and freight of bringing the goods to the port of destination specified by the buyer. The Best Buy television order receives damage from water during fire fighting efforts. Hello Imran, What you have written in your answer is basically right. CIF risk transfer takes place when the merchandise is loaded onto the shipping vessel and is recommended for situations in which the seller is able to access the vessel directly, such as in the case of bulk cargo shipping. Cost, insurance, and freight (CIF) is an expense paid by a seller to cover the costs, insurance, and freight of a buyer's order while it is in transit. What does CIF stand for in Shipping Terms? CIF means they will pay for the cost, the insurance and the freight, where CNF means the consignee is responsible for the insurance only. The shipping terms CIF (Cost, Insurance, Freight) and CFR (Cost and Freight) are what this type of shipping method works under. FOB and CIF are among the most common of the 12 international commerce terms (incoterms) established by the International Chamber of Commerce (ICC) in 1936. Refer to CPT, obviously excepting the tip on the buyer arranging insurance. I suggest you to read these articles on CIF and DDP, so as to enable you to have a clear idea on these shipping terms. Although the seller is responsible for insurance, the risk transfers to the buyer before the main carriage. Under delivered duty paid (DDP), the seller is responsible for the cost of transporting goods until customs clears them for import at the destination. It is similar to free on board shipping with the primary difference being which party is responsible for the expenses up to the point of loading the product onto the transport vessel. However, a buyer may stipulate that the seller is responsible until the goods reach a port of import or even their final destination. Are you interested to become a member of the Alfa Logistics Family? CIF Incoterms® meaning There are 11 Incoterms® rules in total, and CIF – standing for cost, insurance and freight – is one of four that relate only to waterbound transportation. CIF shouldn’t be used for air or land transportation, or for containerized goods. The seller is not obliged to arrange insurance for pre-carriage in the export country or carriage in the import country unless this is specified elsewhere in the sales contract. Cost, Insurance and Freight (CIF) Meaning. The ICC's official definition of CIF reads. Cost, insurance and Freight (CIF), maritime condition. If using CIP instead, insurance coverage defaults to all-risk; however, the parties may negotiate a lower coverage requirement. CIF is an Incoterm that stands for: Cost, Insurance, Freight agreement, with the seller holding responsibility for all three. The contract terms of CIF define when the liability of the seller ends and the liability of the buyer begins. CNF and CIF are more secure than CAD. This typically will be an original insurance policy covering just that transaction or a certificate issued by the insurer under the seller’s existing open marine policy. As the container ship is en route, a fire breaks out in one of the cargo bays. During the shipping process, the ex… CIF (Cost, Insurance and Freight) and CFR (Cost and Freight, sometimes called C&F or CNF) are widely used international shipping terms or Incoterms. It called Freight Prepaid (fee prepayment). Once the freight loads, the buyer becomes responsible for all other costs. CIF – Cost, Insurance & Freight Cost, Insurance and Freight means that the seller delivers when the goods pass the ship's rail in the port of shipment. This incoterm works exactly like CPT, excepting the seller is also responsible for arranging main carriage insurance. Cost, insurance and freight (CIF) are used to allocate risk and cost liability in a shipping contract between a buyer and a seller. Cost and freight (CFR) is a trade term obligating the seller to arrange sea transportation to a port of destination and provide the buyer with the documents necessary to obtain the goods from the carrier. With CIF, risk is transferred only when the goods are loaded on board the ship at origin. I believe you are looking for some clarification so see below. In Short, all delivery expenses up to a predetermined destination is borne by the Seller (Exporter). Usually, exporters who have direct access to ships will use CIF. The seller contracts for insurance and pays the insurance premium. The seller need only arrange minimum insurance cover, to the invoice value of the goods. What Is Cost, Insurance, and Freight (CIF)? Our HQ will contact you as quickly as possible to initiate the membership procedure. The advantage to the buyer is that it does not have to worry about declaring the shipment to its own insurer. Incoterms are common trade rules developed by the International Chamber of Commerce (ICC) in 1936. CIF is similar but not the same as carriage and insurance paid to (CIP). Note that some countries do not permit CIF imports, requiring the buyer to insure with an insurer in its own country. Incoterms 2020 dictates that the CIF Incoterm, or “Cost, Insurance and Freight”, is exclusive to maritime shipping. Definition of CIF (Cost insurance and Freight), Revisions of CIF (Cost insurance and Freight) under Incoterms 2020. This rule and CIP (Carriage & Insurance Paid to) are the only two rules that place an obligation on the seller to arrange insurance for the consignment. The crucial difference between an FOB and a CIF agreement is the point at which responsibility and liability transfer from seller to buyer. Note that this insurance covers the buyer’s risk, because risk will pass from the seller to the buyer before the main carriage. If your supplier quoted you a CNF Felixstowe price, it means that the price includes shipping of the goods via sea freight to the Felixstowe port. In common practice, the CFR Incoterm is often preferred by buyers if they are able to secure better cargo insurance coverages. The disadvantage to the buyer can be that the insurer may well not be too enthusiastic about meeting any claim. This creates a grey area during which cargo could unknowingly suffer damages. Uniform Commercial Code) but with international applications. ‘cost, insurance, freight’, a special type of sale of goods. They must also give the buyer sufficient notice of delivery and provide proof of delivery and loading. The exact details of the sales contract will determine when the liability for the goods transfers from seller to buyer. CIF risk transfer takes place when the merchandise is loaded onto the shipping vessel and is recommended for situations in which the seller is able to access the vessel directly, such as in the case of bulk cargo shipping. Purchasing export licenses for the product, Covering the cost and contracts of moving or carrying the goods, Insurance to protect the value of the order, Covering the cost of any damage or destruction to the goods. The only significant operational difference is that with CNF the buyers of goods secure the insurance. Meaning of FOB? They are fairly common international commerce terms (incoterms) that were … Until the goods are fully loaded onto a transport ship, the seller bears the costs of any loss or damage to the product. For example, the parties to a contract must state the locale of the governing law for their terms. Both of these will normally show the seller as the “insured” or “assured” and will require the seller to endorse the document on the reverse such that the buyer or any bona fides holder with an insurable interest in the goods at the time of loss or damage occurred can claim. However, we recommend that new buyers use CIF as they get accustomed to the importing process. Terms of Cost, Insurance, and Freight (CIF), Learn About the Free Carrier – FCA Delivery Option, Everything You Need to Know About Free Alongside (FAS), Ex Works (EXW) Shipping: When the Buyer Covers Transportation Costs. CIF stands for “cost insured freight”. The ICC limits the use of CIF of transport goods to only those that move via inland waterways or by sea. Once loading is complete, Best Buy becomes liable for all costs associated with transporting the ordered goods to their final destination. Under CIF, the seller is responsible for the cost and freight of bringing the goods to the port of destination specified by the buyer. Cost, Insurance and Freight (CIF) are the expenditures that are borne by the seller in order to cover not just the regular costs but also the charges pertaining to the freight, and insurance for securing the losses (if any) that could arise out of probable damage or theft of a customer’s order while the same is in transit for being delivered to the port that is provided in the … The goods are exported to a port named in the sales contract. Unlike some other Incoterms, the risk transfer point of the CIF Incoterm is not the same point as the cost transfer point. CIF Felixstowe (Cost, Insurance and Freight Felixstowe) CIF terms on the basis of the destination port being Felixstowe UK. In CIF terms, the seller clears the goods at origin places the cargo on board and pays for insurance until the port of discharge at the minimum coverage. It is defined that insurance for CIF is insured under the FPA condition which is the insurance of the minimum collateral condition. Cost Insurance and Freight (CIF) Use of this rule is restricted to goods transported by sea or inland waterway. Cost, insurance, and freight (CIF) is an expense paid by a seller to cover the costs, insurance, and freight of a buyer's order while it is in transit. Free alongside (FAS) is a trade term that obligates a seller of goods for export to deliver those goods to a specific port right alongside a vessel designated by the buyer. With CIF, responsibility transfers to the buyer when the goods reach the point of destination. The ICC established these terms to govern the shipping policies and responsibilities of buyers and sellers who engage in international trade. Other typical expenses include customs duties, taxes, and the shipment of goods to their final location. That means either sea freight or transportation via inland waterways. Don't miss out on our promotions,events and network news. DAT (Delivered at Terminal) Sony delivers the order to the port and loads them onto the Yantian Express. CIF stands for Cost, Insurance, and Freight. CIF Shipping Term: Under CIF terms of delivery in export business, Cost Insurance and Freight included in the selling cost of goods. 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