Understanding Incoterms: Cost, Insurance, Freight (CIF) | [2023]

07 December 2022
by Pro Carrier

Cost, Insurance, Freight (CIF) is one of the 11 Incoterms published by the International Chamber of Commerce. It defines the point at which responsibility for goods passes from the seller to the buyer.

In this article, we’ll explain what CIF means in more detail, how it benefits buyers and sellers, and when it’s suitable to use.

What does Cost, Insurance, Freight (CIF) mean?

When you ship CIF, the seller is responsible for goods up until their arrival at the destination port. That means the seller must deliver the goods to a ship, load them onto the ship and insure the goods for the entirety of the journey. The seller must also handle export documentation and licenses if required and oversee any inspections.

Insurance is required to be minimum coverage, which is the commercial value of goods plus an additional 10%. The seller is responsible for the costs of any goods that are lost or damaged until the goods arrive at the destination port.

Once the goods reach the destination port, the buyer assumes all responsibility. That includes the terminal charges upon arrival, the costs of unloading goods from the ship and the costs of delivering the shipment to its final destination.

CIF is usually used when transporting cargo in bulk, oversized items and oil. It is similar to CIP(carriage and insurance paid), but CIF only applies to goods shipped by ocean freight. CIP can be used for any mode of transport.

What Are the Benefits of CIF?

Shipping CIF offers a clear division of responsibilities which can make shipping simple for both the buyer and seller. From the buyer’s perspective, they don’t have to worry about shipping costs or insurance. They get a fixed price for their ocean freight and only have to worry about the costs of transporting goods to their final destination.

While sellers take on slightly more responsibility for the shipment than with other Incoterms, they can streamline their services and achieve favourable rates with shipping lines. It is especially effective when sellers ship FCL.

Like any Incoterm, Cost, Insurance, Freight isn’t perfect. From the buyer’s perspective, the cost of shipping may be inflated since they are not in control of this part of the delivery. Shipments can also take longer than expected.

What Are the Potential Issues of CIF?

Like any Incoterm, Cost, Insurance, Freight isn’t perfect. From the buyer’s perspective, the cost of shipping may be inflated since they are not in control of this part of the delivery. Shipments can also take longer than expected.

What are my CIF Responsibilities as a Buyer?

The buyer only assumes responsibility for goods shipped CIF when they reach the destination port.

At that time the buyer will need to cover the costs for the following processes:

  • Terminal charges, if applicable
  • Unloading goods from the ship
  • Storing goods, if required
  • Custom duty changes and any other associated costs
  • Transporting goods to their final destination

What are my CIF Responsibilities as a Seller?

The seller is responsible for all of the goods’ journey from factory to destination port.

They must:

  • Arrange and pay for transportation to the port
  • Handle export customs at port and arranging export licenses
  • Load goods onto the ship
  • Arrange ocean freight from the port of origin to the port of destination
  • Insurer the goods for the entire journey
  • Cover the costs of any damage to goods during the journey

What Other Incoterms Are There?

There are 11 Incoterms in total developed by the International Chamber of Commerce. All of them outline the specific point when the responsibility for goods transfers from the seller to the buyer. Below is a full list of Incoterms arranged in order from the least responsibility for the seller to the most.

  • Ex Works (EXW)
  • Free Carrier (FCA)
  • Free Alongside Ship (FAS)
  • Free on Board (FOB)
  • Carriage paid to (CPT)
  • Carriage and Insurance paid to (CIP)
  • Cost and Freight (CFR)
  • Cost, Insurance and Freight (CIF)
  • Delivered at Place (DAP)
  • Delivered at Place Unloaded (DPU)
  • Delivered Duty Paid (DDP)

Is FOB or CIF Better?

The question of whether FOB or CIF is a better incoterm is a common one. For buyers, shipping FOB is usually a more cost-effective solution. Buyers have more control over shipping lines and insurance limits with FOB, meaning they can keep costs down. They also have more control over delivery deadlines.

At the same time, FOB requires the buyer to be responsible for a lot more of the shipping process and requires them to do a lot more work.
If you want to ship CIF from the far east to the UK, trust Pro Carrier to be your partner of choice. We combine cutting-edge technology with obsessive customer service to ensure we deliver an unsurpassed freight forwarding experience. Find out more about how you can ship CIF by speaking with a consultant or start building your own quote today.

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