Under CIF (short for “Cost, Insurance and Freight”), the seller delivers the goods, cleared for export, onboard the vessel at the port of shipment, pays for the transport of the goods to the port of destination, and also obtains and pays for minimum insurance coverage on the goods through their journey to the named port of destination.
The buyer assumes all risk once the goods are on board the vessel for the main carriage; however, they don’t take on any costs until the freight arrives at the named port of destination.
CIF applies to ocean or inland waterway transport only. It is commonly used for bulk cargo, oversized or overweight shipments.
If the freight is containerized and delivered only to the terminal, use CIP instead. If using CIP instead, insurance coverage defaults to all-risk; however, the parties may negotiate a lower coverage requirement.
The seller is obligated to secure insurance for the buyer, but only for minimum coverage.
CIF Incoterm Obligations
Seller’s Obligations
Goods, commercial invoice and documentation
Export packaging and marking
Export licenses and customs formalities
Pre-carriage and delivery
Loading charges
Delivery at named port of destination
Proof of delivery
Cost of pre-shipment inspection
Minimum insurance coverage
Buyer’s Obligations
Payment for goods as specified in sales contract
Discharge and onward carriage
Import formalities and duties
Cost of import clearance pre-shipment inspection
I am an expert in international trade and shipping, with a comprehensive understanding of the intricacies surrounding the use of trade terms, specifically Incoterms. Over the years, I have actively engaged in advising businesses on efficient shipping practices and ensuring smooth transactions in global commerce.
Now, diving into the article about the Named Place Requirement, particularly under the CIF Incoterm, it is evident that this term plays a crucial role in defining the responsibilities and obligations of both the seller and the buyer in a transaction involving sea and inland waterway transport.
CIF (Cost, Insurance and Freight) is an Incoterm where the seller takes on significant responsibilities. The seller is responsible for delivering the goods, cleared for export, onboard the vessel at the port of shipment. They also pay for the transport of the goods to the named port of destination and secure minimum insurance coverage for the goods during their journey.
Once the goods are on board the vessel for the main carriage, the buyer assumes all risks, but they do not incur any costs until the freight reaches the named port of destination. This makes CIF a suitable choice for ocean or inland waterway transport, especially for bulk cargo, oversized, or overweight shipments.
In terms of obligations, the seller under CIF has several responsibilities, including providing the goods, commercial invoice, and documentation, export packaging and marking, export licenses, and customs formalities. They also handle pre-carriage and delivery, loading charges, and ensuring delivery at the named port of destination. Additionally, the seller must provide proof of delivery, cover the cost of pre-shipment inspection, and secure minimum insurance coverage for the buyer.
On the other hand, the buyer's obligations include making the specified payment for the goods as per the sales contract, handling discharge and onward carriage, import formalities and duties, and covering the cost of import clearance and pre-shipment inspection.
It's crucial to note that CIF is specifically designed for ocean or inland waterway transport. If the freight is containerized and delivered only to the terminal, CIP (Carriage and Insurance Paid To) should be used instead. In the case of CIP, insurance coverage defaults to all-risk, but parties may negotiate a lower coverage requirement. The seller in a CIP arrangement is obligated to secure insurance for the buyer, albeit for minimum coverage.
In summary, understanding the CIF Incoterm is essential for businesses engaged in international trade, especially when dealing with sea and inland waterway shipments. It delineates the responsibilities and obligations of both parties, providing a framework for a smooth and well-managed transaction.
Cost, insurance, and freight (CIF) is an international shipping agreement, which represents the charges paid by a seller to cover the costs, insurance, and freight of a buyer's order while the cargo is in transit. Cost, insurance, and freight only applies to goods transported via a waterway, sea, or ocean.
Insurance: CIF requires the seller to purchase insurance coverage for the goods during transit. This insurance safeguards against potential damage, loss, or theft that may occur while the goods are in transit to the buyer's final destination.
To calculate CIF accurately, one must grasp three fundamental components: the cost of the goods, the expenses associated with insuring the goods, and the freight or shipping charges. The CIF value is calculated by the formula CIF = C+I+F.
The Cost, Insurance, and Freight (CIF) value of a product is an important figure used by customs authorities to calculate duties and taxes. It represents the total cost of the goods including their transportation costs from the place of origin to their destination.
Under CIF (short for “Cost, Insurance and Freight”), the seller delivers the goods, cleared for export, onboard the vessel at the port of shipment, pays for the transport of the goods to the port of destination, and also obtains and pays for minimum insurance coverage on the goods through their journey to the named ...
CIF requires insurance for cargo, CIP does not. Goods under CIP must be insured by both parties; buyer/exporter and seller/importer, but only with respect to the period up until delivery of goods at the destination port.
The seller has to cover the cost and contracts of moving or carrying the goods. The seller has to purchase insurance to protect the value of the order in its entirety. The seller has to provide for inspections of the products.
With the exception of CIF and CIP terms, INCOTERMS place no burden on the seller or buyer to provide insurance. However, depending upon the actual term used for each shipment the seller or buyer bears responsibility for loss or damage to the goods at some point during transit.
The CIP Incoterm or “Carriage and Insurance Paid to” states that the seller is responsible for bringing the goods to the destination, the cost of international freight, as well as insurance costs.
Cost, Insurance, and Freight (CIF) is an Incoterm commonly used in maritime shipping and international transaction contracts. Under CIF terms, the seller is responsible for arranging and paying for the shipping of goods to a destination port and insuring the goods while they are in transit.
However, there are some general guidelines that can help you get an idea of what to expect. Generally speaking, freight insurance will cost between 1% and 2% of the value of the goods being shipped. So, if you are shipping goods worth $10,000, you can expect to pay between $100 and $200 for insurance.
The simplest method to calculate insured value is to add the commercial invoice value of the goods to the cost of freight and add ten percent to cover additional expense.
Cost, Insurance, and Freight (CIF) is one of the 11 Incoterms® rules set by the International Chamber of Commerce. It's an international shipping agreement, which represents the charges paid by a seller to cover the costs, insurance, and freight of a buyer's order while the cargo is in transit.
Freight insurance is an agreement by which insured goods are underwritten (protected) in the event of damages caused by a risk covered in the policy. An insurance invoice is required for customs clearance only when the relevant data does not appear in the commercial invoice.
There are different types of freight insurance policies including cargo insurance, marine insurance, shipping insurance, transport insurance, and transit insurance. All these policies cover merchandise and goods against loss or damage during transit from one location to another.
CIF does not include any import duties, VAT, or taxes. It does include all export requirements. Under CIF, the seller must export and pay the costs to ship to your destination port, but you must import and pay all costs associated with the importation.
The seller covers the cost of shipping, and insurance. The seller also obtains the necessary documentation, licenses, and inspections that may be required. The buyer assumes full responsibility for the goods as soon as they reach the destination port under a CIF agreement.
Freight insurance, also known as limited liability coverage, is the standard coverage provided by carriers. It typically covers loss or damage to goods during transportation, but the coverage limits are predetermined and may not reflect the full value of the shipment.
The term “carriage and insurance paid to (CIP)” signifies that the seller will pay freight and insurance in sending goods to someone chosen by the seller at a mutually agreeable location. The seller must insure the goods being sent for 110% of their contract value.
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Sea and inland waterway only
The seller is obligated to secure insurance for the buyer, but only for minimum coverage.