CIF – COST, INSURANCE, AND FREIGHT

CIF is the acronym for Cost, Insurance, and Freight. This term is used when a seller wants to include all of these costs in the price they offer to sell their products. It’s important for buyers to be aware that this can lead to extra charges on top of what was initially agreed upon. It is also necessary for sellers who use CIF pricing that cost should not exceed insurance because otherwise, it would be impossible for them to make back any profit from the sale.

As a cargo company hopping between different countries, it’s vital to be able to provide an accurate estimate based on your knowledge about shipping rates and taxes so as not to miss out on any opportunities due to higher than expected prices being quoted.

With CIF Incoterm, several obligations are put above sellers and buyers. For instance, this means that all costs associated with loading, unloading, and transporting goods are borne by the buyer. The seller has an obligation under this type of agreement to load the goods on board at his own expense. To know more take a look at the list and see which obligations you may have.

Obligations of the Buyer According to the CIF Incoterm

• Payment and possession of the goods
• From the time the goods are delivered, you assume all risks of loss or damage to them
• Clearance of imports
• Customs duties and taxes
• No requirement to enter into a carriage contract

Obligations of the Seller According to the CIF Incoterm

• Contract of carriage for the delivery of goods and the required documents
• Transportation security
• QC, packaging, and marketing
• Take on all risks of loss or damage to the goods until they are delivered
• Customs duties and taxes
• Insurance for export clearance
• Notify the buyer that the goods have arrived

The seller is contractually obligated to sign up for insurance for the goods during transport under the CIF Incoterm. It is one of two mandatory insurance Incoterms, the other being the CIP Incoterms.

The seller must obtain insurance that covers the purchase price plus 10%. If the buyer wishes to receive additional insurance, they may do so, but they are under no obligation to do so. If the buyer can achieve higher cargo insurance coverage than the seller can, the CFR Incoterm should be used instead. Besides that, you might want to take a look at what you as a buyer or seller have to pay under CIF Incoterm.

As a seller you will be responsible to pay for:

• All costs associated with the goods before delivery
• Costs of Freight Loading
• Security requirements for transportation
• Unloading charges, if for the seller’s account under the carriage contract
• Transport costs, if for the seller’s account under the carriage contract
• Costs of providing standard proof
• Insurance protection
• Taxes and duties

As a buyer you will have to pay for:

• All costs associated with the goods beginning with the time they are delivered
• Transportation expenses Unloading expenses
• Additional insurance costs, if desired
• Taxes and duties

Now you know that CIF is a term used by sellers to offer the product at an all-inclusive price and as a buyer, you have obligations and responsibilities as well. When buying products from overseas markets, in particular, your supplier must fulfill their contractual obligation for shipping terms, insurance coverage for both damage or loss during transit, and when goods arrive at final destination country customs clearance requirements among other things.

What else do you know about CIF? Let us know in the comments!