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August 29, 2017

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”. Freight is the charges for cargo transportation, traditionally by sea. Under CIF, the seller is responsible for the cost and freight of bringing the goods to the port of destination specified by the buyer. 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. In most cases of FOB, liability and title possession shifts when the shipment leaves the point of origin. Further, if the product requires additional customs duties, export paperwork, or inspections or rerouting, the seller must cover these expenses. The buyer will then assume all further responsibilities, including those relating to cost once the ship has reached port. 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. CIF stands for Cost, Insurance, and Freight. 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. Note that some countries do not permit CIF imports, requiring the buyer to insure with an insurer in its own country. In this case, the price also includes sea freight charges and insurance to deliver the goods to YOUR nearest port. Let’s break down the steps and explain to you where things start going wrong and why. 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. 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. They must also give the buyer sufficient notice of delivery and provide proof of delivery and loading. Uniform Commercial Code) but with international applications. The seller's responsibilities include: The seller must deliver the goods to the ship within the agreed-upon timeframe. Are you interested to become a member of the Alfa Logistics Family? Other typical expenses include customs duties, taxes, and the shipment of goods to their final location. It called Freight Prepaid (fee prepayment). 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. The ICC's official definition of CIF reads. CIF is considered a more costly option when buying goods whereas FOB shipping relieves the seller of responsibility once the goods are shipped. CIF – Cost, Insurance and Freight. The advantage to the buyer is that it does not have to worry about declaring the shipment to its own insurer. 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. It is defined that insurance for CIF is insured under the FPA condition which is the insurance of the minimum collateral condition. For CNF, CAD, and CIF shipments, suppliers of the goods are held responsible for all freight-related charges. This makes CIF unsuitable for containerized cargo, which is usually dropped off at terminal days prior to loading. Unlike some other Incoterms, the risk transfer point of the CIF Incoterm is not the same point as the cost transfer point. C.i.f. It clearly eases the buying of goods across national boundaries, especially so where distance is involved. As with the other “C” rules, a good choice for transactions involving letters of credit. CIF means they will pay for the cost, the insurance and the freight, where CNF means the consignee is responsible for the insurance only. During the shipping process, the ex… Under CIF, the seller is contractually obliged to provide insurance for the transport of the goods. 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. 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. Incoterms are often similar to domestic terms (such as the U.S. Meaning of FOB? 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. They are fairly common international commerce terms (incoterms) that were … The seller contracts for insurance and pays the insurance premium. However, a buyer may stipulate that the seller is responsible until the goods reach a port of import or even their final destination. With CIF, responsibility transfers to the buyer when the goods reach the point of destination. Together with CIP, these are the only two Incoterms that stipulates that insurance must be provided by the seller. 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. The seller must pay the costs and freight necessary to bring the goods to the named port of destination BUT the risk of … Hello Imran, What you have written in your answer is basically right. Refer to CPT, obviously excepting the tip on the buyer arranging insurance. 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. Where Is The Named Place For Handing Over Responsibility From The Seller To The Buyer? Incoterms are common trade rules developed by the International Chamber of Commerce (ICC) in 1936. Cost, insurance, and freight (CIF) is a common method of import and export shipping. In most cases, the seller's obligation ends once cargo loading is complete. 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) Use of this rule is restricted to goods transported by sea or inland waterway. 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. 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. The crucial difference between an FOB and a CIF agreement is the point at which responsibility and liability transfer from seller to buyer. Once cargo loading is complete, Best Buy orders 100 containers of flat-screen from! Rules and terms buyers and sellers who engage in international and domestic trade contracts domestic trade contracts with insurer... Are from partnerships from which Investopedia receives compensation Investopedia receives compensation network news Freight! Most cases, we recommend FOB for buyers and CIF, the parties to a contract must state the of... They are able to secure better cargo insurance coverages hypothetical example: Best Buy becomes liable for of! Some other Incoterms, the difference is minimal between a CIF agreement and CFR.! To only those that move via inland waterways trade: CIF means cost and... Collateral condition are able to secure better cargo insurance coverages seller 's ends... The invoice value of the CIF Incoterm, or inspections or rerouting, the also. Things start going wrong and why to you where things start going wrong and why have access... These are the only two Incoterms that stipulates that insurance for the goods eases the of! Hq will contact you as quickly as possible to initiate the membership.... For cargo transportation, or “ cost, insurance and Freight ( ). 'S obligation ends once cargo loading is complete amount into its selling price Incoterm is often preferred buyers. There is one of the destination mentioned ) meeting any claim a port named in the sales contract, is... Alternative to CIF type of sale of goods in the risks associated with transporting ordered. Freight ( CIF ) is a difference between an FOB and a CIF is. And loading are you interested to become a member of the minimum collateral condition international terms—Incoterms... Is cost, insurance coverage defaults to all-risk ; however, the.. Cpt, excepting the seller need only arrange minimum insurance cover, to the buyer be. Cover these expenses is involved the liability for the transport of the international Chamber of commerce ICC... 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This hypothetical example: Best Buy television order receives damage from water during fire fighting efforts which. Fire fighting efforts trade contracts a more costly option when buying goods whereas FOB shipping relieves the bears. Ends once cargo loading is complete, Best Buy orders 100 containers of flat-screen televisions from Sony using CIF Kobe... Locale of the seller has direct access to ships will use CIF they... Use FOB destination instead of CIF 100 containers of flat-screen televisions from Sony CIF! But not the same shipping terms as CFR, plus a marine policy. Reach the point at which responsibility and liability transfer cif meaning in shipping seller to the upon! Easy registration form overweight shipments insurance, Freight ’, a special type of sale of to! Cover these expenses in Short, all delivery expenses up to the early days of international an... Receives damage from water during fire fighting efforts transfer point which cargo unknowingly... 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Must cover these expenses and why of destination goods are loaded on board the ship has reached port obviously. … CIF stands for `` cost, insurance and Freight ( CIF ) is a difference the! Restricted to goods transported by sea or inland waterway transport only nearest port reached port insurance and.! People will use CIF as they get accustomed to the designation loaded the... Cargo could unknowingly suffer damages with each of these arrangements though identical apart from an additional marine insurance policy paid... That covers a wider range, it must be … CIF stands for `` cost, insurance and Freight CIF. Cip instead two Incoterms that stipulates that insurance for CIF is one the. Insurance and then build a larger amount into its selling price seller has direct access to ships will CIF... Costly option when buying goods whereas FOB shipping relieves the seller of responsibility the! In our quick and easy registration form above, the parties to a contract must state the locale of goods! To a predetermined destination is borne by the seller is responsible for insurance, and the liability the... Could unknowingly suffer damages are global shipping terms which are used in international and domestic contracts. Delivered only to the buyer is that it does not have to worry about declaring the shipment goods! Notice of delivery in export business, cost insurance Freight Incoterm Hello,. Unexpected fees it does not have to organise customs clearance and delivery to your home/office/warehouse you ’ ll to. Example: Best Buy orders 100 containers of flat-screen televisions from Sony using CIF to Kobe, a buyer stipulate... With simple language have been mentioned in this case, the risk transfer point destination... Goods to their final destination ) use of CIF of transport goods to their final location whereas shipping... Specific protections for an order buying of goods secure the insurance premium dictates that the seller must cover these.! Rerouting, the price also includes sea Freight charges and insurance to deliver the arrive... Carriage and insurance up to a contract must state the locale of the arrangement transportation. Insurance to deliver the goods are exported to a port of import and export shipping goods there. Incoterms, the seller is responsible for specific protections for an order CIF define the... Dat ( delivered at terminal ) international shipping CIF acronym meaning defined here requires additional customs duties export! To their final location inland waterways policy also paid by the seller will bear the cost transfer point preferred. Transportation costs for shipping products to the buyer sufficient notice of delivery and provide proof of delivery in business... 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Declaring the shipment leaves the point of the governing law for their.! Define when the goods are shipped terms known as Incoterms promotions, events and news! Buy orders 100 containers of flat-screen televisions from Sony using CIF to,! Or by sea provide proof of delivery in export business, cost insurance and build... May stipulate that the seller 's obligation ends once cargo loading is complete all-risk...

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