"CIF" (Cost, Insurance, and Freight) is an Incoterm used in international trade to describe a scenario where the seller delivers goods on board a ship and also arranges for the transport of the goods to the port of destination. Crucially, the seller must pay the cost of this transport and must also procure and pay for insurance against the buyer's risk of loss or damage to the goods during the carriage.

CIF Definition and Scope

Under CIF, the seller clears the goods for export and is responsible for arranging and paying for transportation to the named port of destination. Unlike CFR (Cost and Freight), CIF also requires the seller to provide insurance against the buyer's risk of loss or damage to the goods during transport.

Seller’s Obligations

  • Pay for all costs related to getting the goods to the specified destination including freight and insurance.
  • Ensure the goods are packaged appropriately for shipment and secure transportation to the designated port.
  • Provide insurance that covers the buyer's risk during transport until the goods reach the destination port.

Buyer’s Obligations

  • Pay for any additional costs arising after the goods have been delivered to the destination port.
  • Assume responsibility for the goods once they have been delivered at the destination port, including paying for any import duties, taxes, and other charges.
  • Arrange for the unloading of the goods and any further transportation from the port of destination.

Risk and Cost Transfer Points

The risk transfers from the seller to the buyer when the goods pass the ship's rail in the port of shipment. However, the seller pays for transport and insurance to the destination port.

Benefits and Considerations

  • Benefits: CIF can be advantageous for buyers who prefer the seller to arrange insurance and transportation. It is particularly useful when buyers do not have a presence or familiarity with the shipping practices of the export country.
  • Considerations: While the seller arranges for insurance, it typically covers only a minimum level of protection. Buyers may need to arrange additional insurance to cover the goods fully up to their final destination.

Common Scenarios

Often used for transporting bulk goods, such as commodities and raw materials, where transport costs are significant, and the buyer prefers the seller to manage the logistics and insurance.