CIP, however, requires the seller to provide more comprehensive insurance coverage, typically aligned with the Institute Cargo Clauses (A), which offer wider protection. While Clause C fulfills the seller’s obligation to provide insurance, buyers should assess whether this level of coverage meets their needs and consider arranging additional insurance if broader protection is required. CIF (Cost, Insurance, and Freight) is a widely used Incoterm that simplifies shipping for buyers by including transport and insurance in the price.

Key Takeaways:

IContainers is a digital freight forwarder based in Barcelona that assists thousands of companies and families around the globe in moving their merchandise internationally. The new Incoterms 2020, which were launched earlier this year by the ICC are now in effect. The Incoterms 2010, which you can find in our earlier post here, will still be valid. There are no changes to Cost, Insurance, and Freight under the Incoterms 2020. By doing so, you can make informed decisions that align with your business objectives. The latest Incoterms 2020 rules further refine these guidelines, making it even more critical to stay updated.

The Many Facets of CIF-Driven Trade

For buyers, CIF provides a clear understanding of the total cost of the goods, including shipping and insurance. For sellers, CIF provides a way to clearly outline their responsibilities and costs in the shipping process. This can help sellers to avoid disputes with buyers over the cost of shipping.

CIF terms are mostly commonly used for bulk or oversized shipments, though they can also apply to less-than-container loads. While the buyer assumes risk cost insurance and freight meaning once the goods are on board, they only take on import and delivery costs when the cargo reaches the destination port. Once the shipment arrives at the Port of Genoa, the responsibility shifts to the Italian company. They will handle all further costs and responsibilities, including unloading, customs clearance, and any further transportation from the port to their facility. This arrangement provides the Italian buyer with the convenience of receiving goods at their nearest port without worrying about the complex logistics and risks of international shipping up to that point.

The buyer must accept the transport document provided by the seller if it conforms with the contract between them. CIF is widely used because it simplifies the buyer’s responsibilities, especially if the buyer lacks experience with international logistics. Learn how payroll in France works, including income tax, social contributions, gross salary costs and how to stay compliant with France payroll tax rules.

CIF Incoterms® – Cost, Insurance and Freight

While they are both used only for maritime and inland waterway shipments, they differ in other key aspects. Yes, under CIF Incoterms (Cost, Insurance, and Freight), the seller is generally responsible for choosing the insurance provider. The seller must arrange marine insurance to cover the goods during transit to the designated port of destination.

• This shipping agreement is ideal for moving goods across oceans or major waterways internationally.
• Once the shipment arrives at the Port of Genoa, the responsibility shifts to the Italian company.
• With best-in-class fulfillment software and customizable solutions, we provide hassle-free logistics support to companies of all sizes.
• CIF contract term defines that the liability of a buyer begins from the time when the liability of a seller ends.
• It’s important to note that when shipping internationally, there can be different risk and cost transfer points between the buyer and seller, depending on the type of shipping agreement.

Under CIF Incoterms, these roles are clearly defined to avoid any ambiguity. Imagine a company in Italy purchasing coffee beans from a supplier in Brazil. They agree on CIF Incoterms for the shipment of 10 tons of coffee beans to the Port of Genoa, Italy. CIF is different from Cost and Freight (CFR), whereby sellers aren’t required to insure goods in transit. Under the CIF (Cost, Insurance, and Freight) Incoterm, there are clear roles for both the seller and buyer.

Where Is the Risk Transfer in the Cost, Insurance, and Freight?

• Another difference between CIF and CIP lies in the level of insurance coverage.
• Here, the seller delivers the freight to the port and verifies that the goods are on board, but once they board the vessel, the risk changes to the buyer.
• The buyer will be invoiced for the commercial cost of the goods, plus shipping and insurance, without having to organise the transport themselves.

Yet with FOB, the buyer has much more flexibility and control to choose the carrier and negotiate shipping rates, which can help reduce costs. Cost AllocationCIF requires the seller to cover the total cost of the goods, freight, and insurance. Whereas FOB only requires the seller to cover the cost of loading the goods onto the vessel; the buyer then pays to transport and insure the goods (as well as any other charges incurred once the goods are on board). However, buyers should ensure insurance coverage is adequate since the seller only provides minimum coverage required by the ICC.

Instead, use FCA (Free Carrier), CPT (Carriage Paid To), and CIP (Carriage and Insurance Paid To), which are the correct alternatives as they are meant for containerised freight. Landed cost is the total cost of getting goods from the seller to the buyer’s location, including all expenses up to the destination port. Under CIF (Cost, Insurance, and Freight) terms, this includes the price of the goods, freight charges, insurance, and any other costs incurred during transit. To calculate the landed cost, simply add the CIF price to any additional expenses such as import duties, taxes, and handling fees at the destination port. CIF is an international agreement between a buyer and seller in which the seller has responsibility for the cost, insurance, and freight of a sea or waterway shipment. Although the possession of the shipment transfers to the buyer once the goods have been loaded on the boat or ship, the seller is responsible for any shipping insurance and freight charges.

The commercial invoice typically includes information such as the description and quantity of the goods, the unit price and total cost of the goods, and the amount of insurance and freight paid. The commercial invoice also includes information about the buyer and seller, including their names and addresses. In addition, the commercial invoice may include other relevant details, such as the terms of payment and any applicable discounts or rebates. The use of a commercial invoice helps to ensure that both the buyer and seller have a clear understanding of the costs and terms involved in the sale. By providing a detailed breakdown of the costs, the commercial invoice can help to reduce the risk of disputes between buyers and sellers over the cost of shipping.

The seller bears all the risks and costs to the point where the goods are to be loaded on board a vessel for shipment. Cost Insurance and Freight (CIF) is a well-established Incoterm that defines the responsibilities and obligations of buyers and sellers in international trade transactions. It offers clarity and risk protection, making it a popular choice for long-distance shipping by sea. Cost Insurance and Freight (CIF) is a widely used international trade term that defines the responsibilities and obligations of both buyers and sellers in a transaction.

CIF and DDP are both Incoterms used in international trade, but they allocate costs and risks very differently. They cannot choose the shipping company or route, which might lead to longer transit times or less efficient shipping methods. Additionally, there may be potential hidden costs not covered in the CIF price, such as local handling fees, which can add unexpected expenses.

Use the search bar below to explore articles, services, and resources tailored to your needs. Ben is passionate about International Trade, Import/Export, International Shipping and connecting world markets. For the last 14 years Ben has specialized in importing and exporting goods around the world, and creating software solutions to streamline the import/export process. Offer available for new clients only and expires after 15 days from account creation.