A seller would be prudent to state in the contract not just they will provide an insurance document but state specific wording such as “One original insurance policy or certificate of marine insurance,  for 110 percent of the invoice value, blank endorsed, covering Institute Cargo Clauses (C), Institute War Clauses (Cargo) and Institute Strikes Clauses (Cargo).” Anything more than that in an LC is just superfluous and often meaningless. This makes CIF unsuitable for containerized cargo. When the goods arrive there, you’ll have to organise customs clearance and delivery to your home/office/warehouse. They must also give the buyer sufficient notice of delivery and provide proof of delivery and loading. Under CIF, the seller is responsible for the cost and freight of bringing the goods to the port of destination specified by the buyer. This means that the seller will bear the cost of shipping and insurance up to the designation. Usually, exporters who have direct access to ships will use CIF. With CIF, responsibility transfers to the buyer when the goods reach the point of destination. 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. Examples are requiring presentation of a policy but not a certificate of marine insurance; inserting nonsense words and requirement because “that is how the have always done it”. Further, if the product requires additional customs duties, export paperwork, or inspections or rerouting, the seller must cover these expenses. Where Is The Named Place For Handing Over Responsibility From The Seller To The Buyer? You now know that this is a not just possible but likely scenario. Since the company used CIF shipping, Best Buy is responsible for ensuring the product is safe against damage during the voyage and assumes the cost of the damaged goods. International Shipping CIF acronym meaning defined here. What does CIF stand for in International shipping? Definition of CIF (Cost insurance and Freight) Incoterms 2020 dictates that the CIF Incoterm, or “Cost, Insurance and Freight”, is exclusive to maritime shipping. Cost, insurance and freight (CIF) and free on board (FOB) are international shipping terms used to describe the transportation of goods between a seller and buyer. 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. In most cases, the seller's obligation ends once cargo loading is complete. Incoterms are common trade rules developed by the International Chamber of Commerce (ICC) in 1936. Rules of Cost Insurance Freight incoterm These terms are misused throughout the industry and bent to make it make sense for the people involved. International commercial terms—Incoterms for short—clarify the rules and terms buyers and sellers use in international and domestic trade contracts. This is because unlike CIF, insurance isn’t a seller’s obligation under CFR and can also be acquired by the buyer. The Best Buy television order receives damage from water during fire fighting efforts. This incoterm works exactly like CPT, excepting the seller is also responsible for arranging main carriage insurance. The seller must pay the costs and freight necessary to bring the goods to the named port of destination BUT the risk of … Are you interested to become a member of the Alfa Logistics Family? When purchasing internationally, the seller is responsible for exporting the cargo and shipping it until they arrive at the destination port, while insuring the cargo throughout the voyage. 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. Incoterms are often similar to domestic terms (such as the U.S. 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. What Is Cost, Insurance, and Freight (CIF)? The seller contracts for insurance and pays the insurance premium. As touched upon above, the difference is minimal between a CIF agreement and CFR agreement. Unlike some other Incoterms, the risk transfer point of the CIF Incoterm is not the same point as the cost transfer point. Free carrier is a trade term requiring the seller to deliver goods to a named airport, shipping terminal, or warehouse specified by the buyer. Refer to CPT, obviously excepting the tip on the buyer arranging insurance. CNF and CIF are more secure than CAD. 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. If using CIP instead, insurance coverage defaults to all-risk; however, the parties may negotiate a lower coverage requirement. Incoterms 2020 dictates that the CIF Incoterm, or “Cost, Insurance and Freight”, is exclusive to maritime shipping. Sony delivers the order to the port and loads them onto the Yantian Express. The seller's responsibilities include: The seller must deliver the goods to the ship within the agreed-upon timeframe. Definition of CIF (Cost insurance and Freight), Revisions of CIF (Cost insurance and Freight) under Incoterms 2020. Click below to fill in our quick and easy registration form. Together with CIP, these are the only two Incoterms that stipulates that insurance must be provided by the seller. In CIF, exporter covers freight. If the freight is containerized and delivered only to the terminal, use CIP instead. C.i.f. In most cases of FOB, liability and title possession shifts when the shipment leaves the point of origin. The ICC limits the use of CIF of transport goods to only those that move via inland waterways or by sea. more Incoterms Definition There is a difference between CFR and CIF, which is that there is one additional responsibility on the seller. 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. 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. 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. What does CIF stand for in Shipping Terms? In most cases, we recommend FOB for buyers and CIF for sellers. Cost, insurance, and freight (CIF) is a common method of import and export shipping. It called Freight Prepaid (fee prepayment). CIF – Cost, Insurance and Freight. 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. 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. It is commonly used for bulk cargo, oversized or overweight shipments. CIF Felixstowe (Cost, Insurance and Freight Felixstowe) CIF terms on the basis of the destination port being Felixstowe UK. CIF applies to ocean or inland waterway transport only. Hello Imran, What you have written in your answer is basically right. As defined in Incoterms® 2010, CIF means that the seller is required to deliver the goods on board the vessel or procures the goods already so delivered. CIF determines when the responsibility for goods transfers from the seller to the buyer. During the shipping process, the ex… CIF is similar but not the same as carriage and insurance paid to (CIP). 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. 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. 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. Under CIF, the seller is contractually obliged to provide insurance for the transport of the goods. The crucial difference between an FOB and a CIF agreement is the point at which responsibility and liability transfer from seller to buyer. CIF stands for Cost, Insurance, and Freight. If the importer wants insurance that covers a wider range, it must be … When dealing with containerized cargo, CIP is the recommended alternative to CIF. The only significant operational difference is that with CNF the buyers of goods secure the insurance. CIF is an Incoterm that stands for: Cost, Insurance, Freight agreement, with the seller holding responsibility for all three. Top CIF acronym definition related to defence: Cost, Insurance and Freight CIF is different from cost and freight provision (CRF) whereby sellers are not required to insure goods in transit. The quoted price includes the cost of the goods, the cost of insurance while the goods are in transit and the cost of the freight to the destination. These may all seem like a bunch of confusing acronyms, but I can assure you they have a very important meaning when it comes to merchandise. This rule too dates back to the early days of international shipping an is largely unchanged since then. 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. They are identical apart from an additional marine insurance policy paid for by the seller. The same shipping terms as CFR, plus a marine insurance policy also paid by the seller. The offers that appear in this table are from partnerships from which Investopedia receives compensation. That means either sea freight or transportation via inland waterways. CIF is considered a more costly option when buying goods whereas FOB shipping relieves the seller of responsibility once the goods are shipped. The seller need only arrange minimum insurance cover, to the invoice value of the goods. As with the other “C” rules, a good choice for transactions involving letters of credit. Until the goods are fully loaded onto a transport ship, the seller bears the costs of any loss or damage to the product. The advantage to the buyer is that it does not have to worry about declaring the shipment to its own insurer. The disadvantage to the buyer can be that the insurer may well not be too enthusiastic about meeting any claim. 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. Don't miss out on our promotions,events and network news. For CNF, CAD, and CIF shipments, suppliers of the goods are held responsible for all freight-related charges. In practice it should be used for situations where the seller has direct access to the vessel for loading, e.g. It is defined that insurance for CIF is insured under the FPA condition which is the insurance of the minimum collateral condition. CIF means, Cost, Insurance and Freight (paid up to the destination mentioned). 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 (Cost, Insurance and Freight) and CFR (Cost and Freight, sometimes called C&F or CNF) are widely used international shipping terms or Incoterms. 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. Note that this insurance covers the buyer’s risk, because risk will pass from the seller to the buyer before the main carriage. 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. Freight is the charges for cargo transportation, traditionally by sea. CNF is similar to CIF, except insurance is not included. The contract terms of CIF define when the liability of the seller ends and the liability of the buyer begins. The ICC established these terms to govern the shipping policies and responsibilities of buyers and sellers who engage in international trade. 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. 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 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. Consider this hypothetical example: Best Buy orders 100 containers of flat-screen televisions from Sony using CIF to Kobe, a Japanese port. Sometimes people will use FOB destination instead of CIF. With CIF, risk is transferred only when the goods are loaded on board the ship at origin. DAT (Delivered at Terminal) They are fairly common international commerce terms (incoterms) that were … Advantages and Disadvantages of CIF – Cost insurance and Freight, CIF (Cost insurance and Freight) and Letters of Credit, Privacy Policy of Atlas International Network NV, Goods, commercial invoice and documentation, Payment for goods as specified in sales contract, Cost of import clearance pre-shipment inspection. CIF stands for “cost insured freight”. CIF stands for "cost, insurance and freight" in shipping. There is a difference in the risks associated with each of these arrangements though. The exact details of the sales contract will determine when the liability for the goods transfers from seller to buyer. Cost, insurance and freight (CIF) are used to allocate risk and cost liability in a shipping contract between a buyer and a seller. 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. ‘cost, insurance, freight’, a special type of sale of goods. Other typical expenses include customs duties, taxes, and the shipment of goods to their final location. Cost, Insurance and Freight (CIF) Meaning. The seller assumes the responsibility for all of the arrangement and transportation costs for shipping products to the agreed upon destination port. 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. It clearly eases the buying of goods across national boundaries, especially so where distance is involved. This is a trade term meaning that the seller must arrange for the carrying of goods by sea to a destination port as well as provide the buyer with any necessary documents to receive the goods from the carrier. bulk cargos or non-containerised goods. I believe you are looking for some clarification so see below. The major difference between FOB and CIF is when liability and ownership transfers. Once the freight loads, the buyer becomes responsible for all other costs. In common practice, the CFR Incoterm is often preferred by buyers if they are able to secure better cargo insurance coverages. 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. Under CIF terms, the seller is responsible for specific protections for an order. CIF is a conventional method of shipping goods for importers. The goods are exported to a port named in the sales contract. Note that some countries do not permit CIF imports, requiring the buyer to insure with an insurer in its own country. Cost, insurance and Freight (CIF), maritime condition. Our HQ will contact you as quickly as possible to initiate the membership procedure. CIF Shipping Term: Under CIF terms of delivery in export business, Cost Insurance and Freight included in the selling cost of goods. 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 is one of the international commerce terms known as Incoterms. However, risk is transferred to the buyer once the goods are loaded on the ship. However, we recommend that new buyers use CIF as they get accustomed to the importing process. In Short, all delivery expenses up to a predetermined destination is borne by the Seller (Exporter). Given the nature of containerized cargo, which remains unopened until destination, it would be nearly impossible to know when merchandise gets damaged in the event that it does. This creates a grey area during which cargo could unknowingly suffer damages. Uniform Commercial Code) but with international applications. FOB saves buyers money and provides control, but CIF helps sellers have a higher profit. This makes CIF unsuitable for containerized cargo, which is usually dropped off at terminal days prior to loading. 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. The shipping terms CIF (Cost, Insurance, Freight) and CFR (Cost and Freight) are what this type of shipping method works under. CIF is one of the international commerce terms known as Incoterms. The ICC's official definition of CIF reads. The buyer will then assume all further responsibilities, including those relating to cost once the ship has reached port. As with CFR and CIF, these terms can be less favourable for buyers, meaning less control and unexpected fees. Once loading is complete, Best Buy becomes liable for all costs associated with transporting the ordered goods to their final destination. As the container ship is en route, a fire breaks out in one of the cargo bays. Cost, insurance, and freight (CIF) is a method of exporting goods where the seller pays expenses until the product is completely loaded onboard ship. Under CIF, the seller is responsible for the cost and freight of bringing the goods to the port of destination specified by the buyer. Meaning of FOB? For containerised goods, consider ‘Carriage and Insurance Paid CIP’ instead. Although the seller is responsible for insurance, the risk transfers to the buyer before the main carriage. These are global shipping terms which are used in international trade: CIF means Cost Insurance and Freight. Common usage would be “CIF Buyer’s address” C&F means “cost and freight” which means the seller pays for shipping, but CIF shouldn’t be used for air or land transportation, or for containerized goods. CIF is only used for sea or inland water-based transport and is unsuitable for containerized cargo or fresh product shipping. Under CIF, the seller is responsible for the cost and freight of bringing the goods to the port of destination specified by the buyer. 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. Cost Insurance and Freight (CIF) Use of this rule is restricted to goods transported by sea or inland waterway. 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. Let’s break down the steps and explain to you where things start going wrong and why. 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 … 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 detailed articles on CIF and DDP with simple language have been mentioned in this web blog separately. For example, the parties to a contract must state the locale of the governing law for their terms. See more. However, a buyer may stipulate that the seller is responsible until the goods reach a port of import or even their final destination. Under delivered duty paid (DDP), the seller is responsible for the cost of transporting goods until customs clears them for import at the destination. CIF – COST INSURANCE AND FREIGHT (named port of destination): Seller must pay the costs and freight includes insurance to bring the goods to the port of destination. In this case, the price also includes sea freight charges and insurance to deliver the goods to YOUR nearest port. 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. 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