Part of the Comprehensive Incoterms Guide
CIF In Plain English
CIF (Cost, Insurance, And Freight) is a tricky incoterm. Read the details carefully. Not recommended.
CIF, which stands for Cost, Insurance, and Freight, is an Incoterm commonly used in international trade. While it is a well-established term, it comes with complexities that demand careful consideration. The abbreviation itself encapsulates the three key components that define the seller’s responsibilities under CIF: the cost of the goods, insurance coverage during transit, and the freight or shipping charges to transport the goods to a specified destination.
Under CIF, the named place for handing over responsibility from the seller to the buyer is clearly outlined. This Incoterm operates similarly to CPT (Carriage Paid To), with the distinction that the seller not only covers the cost of transporting the goods to the agreed destination but also assumes the responsibility of arranging and paying for insurance coverage during the main carriage.
The critical aspect of CIF lies in the comprehensive nature of the seller’s obligations. While this may seem convenient for the buyer, it’s essential to read the details carefully and be aware of the potential complexities involved. The intricacies of insurance coverage, the determination of the named destination, and the various associated costs make CIF a term that requires meticulous attention to detail.
It’s worth noting that some experienced traders may caution against using CIF due to its complexity and potential pitfalls. The added responsibility for insurance places a significant burden on the seller, and misunderstandings or oversights in the agreement can lead to disputes and financial complications.
Where Is The Named Place For Handing Over Responsibility From The Seller To The Buyer?
This incoterm works exactly like CPT, excepting the seller is also responsible for arranging main carriage insurance.
What Does The ICC Say?
Not recommended for containerized freight. Designed for bulk and break bulk cargo.
Is This A Good Choice?
Refer to CFR.
CFR Tips And Tricks
- Refer to CPT, obviously excepting the tip on the buyer arranging insurance.
- The seller need only arrange minimum insurance cover, to the invoice value of the goods. 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.
- Although the seller is responsible for insurance, the risk transfers to the buyer before the main carriage.
- 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.