Incoterm CIF (Cost, Insurance and Freight): your supplier pays for freight and insurance
The Incoterm CIF (Cost, Insurance and Freight) is one of the most traditional and widely used maritime terms, especially for beginner importers. Under CIF, the seller handles all transport up to the destination port and, crucially, has the obligation to take out an insurance policy in your favour.
It is a very convenient option if you prefer your supplier to manage the main logistics and insure the cargo until it arrives in your country.
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How does CIF work? The point of risk is separated from the cost
Practical Example:
The Chinese supplier organises and pays for transport from their factory to the port of Shanghai.
The supplier is also responsible for loading the goods onto the vessel.
Transfer of risk: The moment the cargo crosses the ship's rail in Shanghai, the risk of any damage or loss passes to you, the buyer.
Distribution of costs: The supplier pays for the sea freight from Shanghai to London.
Insurance: The supplier takes out a minimum insurance policy (Clause C) in your name, which covers the cargo during the voyage.
Your responsibility: Once the goods arrive in London, you are responsible for unloading, import customs clearance, and all costs until they reach your warehouse.
Responsibilities under Incoterm CIF
Seller's responsibility:
- Packaging and preparing the goods.
- Managing and paying for inland transport at the origin.
- Managing and paying for export customs clearance.
- Loading the goods on board the vessel.
- Arranging and paying for sea freight to the destination port.
- Arranging and paying for a minimum insurance policy (Clause C) in favour of the buyer.
- Assuming the risk until the goods are on board the vessel.
Your Responsibility (Buyer):
- Assuming the risk from the moment the goods are on board the vessel at the port of origin.
- Paying for unloading at the destination port.
- Managing and paying for import customs clearance, duties, and tariffs.
- Paying for transport from the destination port to your warehouse.
CIF vs. CFR and FOB: The difference is insurance and control
CIF vs. CFR
The main difference is the obligation for insurance. Under CFR, the seller does not insure the cargo, whereas under CIF they do (with minimum coverage).
CIF vs. FOB
Under FOB, you as the buyer arrange and pay for the sea freight. Under CIF, the seller does. If you have a trusted freight forwarder and want to control costs, FOB is better. If you prefer the convenience of your supplier managing everything up to the port, CIF is your option.
Please note!
Frequently Asked Questions
01.Sea freight only?
Correct, it is an Incoterm exclusive to sea or inland waterway transport.
02.Who is the beneficiary?
The buyer: the seller takes out the insurance in the buyer's favour. But the risk is the buyer's from the moment the goods are on board the vessel, and the compulsory cover is the minimum (Clause C).
03.When does the risk shift?
Risk passes to the buyer the moment the goods are on board the vessel at the port of origin, even though the seller pays freight and insurance to the port of destination.
Other Incoterms
EXWEx Works
The least responsibility for the seller. The goods are delivered at their warehouse or factory. The buyer assumes all costs and risks from that point.
FCAFree Carrier
The seller delivers the goods to the carrier designated by the buyer.
CIPCarriage and Insurance Paid To
The seller pays for transport and insurance to the agreed destination.
DPUDelivered at Place Unloaded
The seller assumes all costs and risks until the goods are delivered and unloaded at the agreed destination (e.g., a terminal or warehouse).
DAPDelivered At Place
The seller delivers when the goods are made available at the agreed place.
FASFree Alongside Ship
The seller delivers the goods to the carrier designated by the buyer.
