Cost, Insurance and Freight (CIF) – Incoterms® 2020 in detail

The following article describes everything you need to know about the Incoterm “Cost, Insurance and Freight” (CIF). In case of any questions or unclarities, do not hesitate to contact us.

Group C: Main Carriage Paid – Cost, Insurance and Freight (CIF)

The Incoterms rule CIF stands for “Cost, Insurance and Freight”. It is an international shipping agreement which clarifies responsibilities of buyer and sellers when shipping goods via sea and inland waterway only. The rule differentiates between transfer of risk and transfer of cost, as they take place separately. The seller is responsible for all costs until the goods arrive at the buyer´s port which is determined in the contract. This includes transport costs as well as insurance coverage for the goods that are shipped. The transfer of risk takes place directly after loading the goods onto the ship. After that, the buyer is responsible for the risk of lost or damaged items, while the seller is still liable for any costs.

HS vs HTS Code

Example 1:

The owner of a shop who sells exclusive household goods in England buys special glasses from a company which is settled in Norway. They agree on CIF. The seller organizes the shipping and pays for the required transportation costs. During the shipping, there is a storm and some of the glasses get damaged. Because they are already loaded, the shop owner is already responsible for any risks. As they agreed to CIF, the seller was committed to make an insurance. This insurance can now be used by the shop owner for his damaged glasses.

Who has which obligations?

Seller:

  • Export Packaging
  • Loading Charges
  • Delivery to Port
  • Export formalities Including export duties, taxes and customs clearance
  • Handling changes which may be susceptible at origin terminal
  • Loading on carriage and necessary freight charges
  • Insurance

 

Buyer:

  • Payment for goods as specified in sales contract
  • Discharge at destination terminal and onward delivery to destination, including unloading at final destination.
  • Import formalities including import duties, taxes and customs

Comparing CIF to other Incoterms

The Incoterm Cost, Insurance and Freight (CIF) has of course touchpoints with other Incoterms. In the next section, we point out the main differences to other, similar Incoterms.

What is the difference between CIF and Free on Board (FOB)?

In comparison to CIF, the buyer has more responsibility when using Free on Board (FOB). The seller only is responsible for risks and costs until the goods are loaded onto the ship. After that, the responsibility of all risks, costs and other duties during are transferred to the buyer. This leads to more transparency for and influence of the buyer on the further process of transport.

What is the difference between CIF and Carriage and Insurance Paid to (CIP)?

The main difference between CIF and Carriage and Insurance Paid to (CIP) is the mode of transport. While CIF is only applicable for shipping via sea, CIP can be used for any mode of transport. Another difference is the transfer of risk. When using CIP, the transfer of risk from seller to buyer takes place when the goods are delivered to the first carrier at a named destination, which does not need to be a port.

How ALS can support you with the complexity of international commerce

ALS is an innovative, neutral, and globally active customs broker. We operate as a unified entity, where every member of our team, from your dedicated contacts to our board of directors, is committed to meeting your specified needs.

We are here to guide you through the process of international trade. Whether it’s speaking to one of our sales team, or requiring further guidance with our consultants, we offer everything to help facilitate your complete end-to-end customs solution. By law, we are not able to provide you with advice on which Incoterm you should use. However, we can provide you with information which you can use to make your decision.

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What are the various Incoterms? Learn more! 

Incoterms – short for international commcerial terms – are being used to clarify rules and terms of the international customs trade.

Learn more in our other articles about incoterms:

  • Ex Works (EXW)
  • Free Carrier (FCA)
  • Carriage Paid To (CPT)
  • Carriage and Insurance Paid To (CIP)
  • Delivered at Place (DAP)
  • Delivered at Place Unloaded (DPU)
  • Delivery at Frontier (DAF)
  • Delivery ex-Ship (DEX)
  • Delivered Duty Paid (DDP)
  • Deliver Duty Unpaid (DDU)
  • Free Alongside Ship (FAS)
  • Free on Board (FOB)
  • Cost and Freight (CFR)
  • Insurance, and Freight (CIF)