✳️ What is &aposCost, Insurance and Freight - CIF&apos

✳️ What is 'Cost, Insurance and Freight - CIF'
Cost, insurance and freight (CIF) is a trade term requiring the seller to arrange for the carriage of goods by sea to a port of destination, and provide the buyer with the documents necessary to obtain the goods from the carrier.

✅BREAKING DOWN 'Cost, Insurance and Freight - CIF'
Contracts involving international transportation often contain abbreviated trade terms that describe matters such as the time and place of delivery, payment, when the risk of loss shifts from the seller to the buyer and who pays the costs of freight and insurance. The most commonly known trade terms are called Incoterms​, published by the International Chamber of Commerce (ICC). These are often identical in form to domestic terms (such as the American Uniform Commercial Code), but have different meanings. As a result, parties to a contract must expressly indicate the governing law of their terms.

✅ According to the ICC, the official definition of CIF stipulates that, "The seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination," adding that the seller is also responsible for insuring the goods to cover the risk of loss or damage during carriage. Further insurance beyond the required minimums must be agreed upon between the buying and selling parties, or must be arranged for separately by the buyer. It is also important to note that the term applies only to sea and inland waterway transport.

✅ Application of Incoterms
Incoterms consist of the 13 international commerce terms developed by the ICC in 1936 that aim to govern the shipping policies and responsibilities of the buyers and sellers who engage in international trade. By communicating contract models, these pre-defined commercial terms function to facilitate orderly trade, procurement processes and other international transactions across country lines and language barriers. Recognized by governments, legal authorities and practitioners worldwide, the terms strive to reduce or outright remove variations on interpretations of sales contracts. The three-letter trade terms, which each cover a common contractual sales practice, are primarily intended to communicate clearly and consistently the tasks, costs and risks associated with the delivery and transport of goods. The ICC published its eighth and most recent version of the rules–Incoterms® 2010–on January 1, 2011.

Each Incoterm specifies the parties responsible for goods in transit, insurance coverage and freight charges. The contracts also denote the point at which a seller's obligation is complete and the buyer assumes responsibility. This transfer of responsibility and liability is known as the delivery, even though the goods may still be in transit. As a point of comparison, below we have outlined the distinctions between CIF and several similar Incoterms:

✅ CIF vs. CFR

Cost and Freight (CFR), like CIF, requires the seller to pay the costs and freight necessary to transport goods to the named port of destination. Risk responsibility for lost or damaged goods, as well as any additional costs, gets transferred from the seller to the buyer once the goods are onboard the ship in the port of shipment. CFR requires the seller to clear the goods for export. CFR and CIF are similar agreements; the exception being that, under CIF, the seller is obligated to insure the goods while in transit for 110% of their value.

✳️ CIF vs. CIP

Carriage and Insurance Paid (CIP) is also similar to CIF in that the seller is responsible for providing insurance coverage for the goods while in transit for 110% of their value. However, CIP applies to all modes of transport, while CIF can only be used for non-containerized sea freight.

✳️ CIF vs. FOB