CIF

CIF is a delivery term from the Incoterms rules of the International Chamber of Commerce. The three letters of the name (Cost, Insurance and Freight) list what the seller includes in the price: the goods themselves, cargo insurance and freight. In the contract, CIF is followed by the port of destination, for example “CIF Novorossiysk”. The term is designed for carriage by sea and inland waterways; it is not used for other modes of transport.

Who does what

The seller:

• supplies the goods and handles export clearance;
• concludes the contract of carriage and pays the freight to the port of destination;
• insures the cargo in favor of the buyer, on minimum cover by default;
• hands the documents to the buyer, above all the bill of lading.

The buyer:

• takes delivery of the cargo at the port of destination;
• handles import clearance and pays duties and taxes;
• pays for unloading, unless the contract of carriage puts it on the seller.

The key feature

Costs and risk pass at different points. The seller pays for carriage to the port of destination, but the risk of loss of or damage to the cargo passes to the buyer once the goods are loaded on board the vessel at the port of shipment. That is why insurance matters to the buyer in particular. If broader cover is needed, its terms are written into the contract.

CIP is suitable for container and multimodal transport. The logic is the same, but the risk passes when the cargo is handed over to the first carrier, and the insurance cover is broader by default.

How CIF affects payments

The buyer pays the seller one invoice that already includes freight and insurance. There is no need to pay the carrier separately. The CIF price is usually close to the base that customs uses for the customs value, and the duty and VAT are calculated from that.

If under the contract the buyer pays for carriage, that is a different term, such as FOB, and freight is paid separately. More details: Freight payments.