What Is Cost, Insurance, and Freight (CIF)?

CIF is one of the 11 incoterms which developed by the International Chamber of Commerce (ICC) in 1936. The ICC established these terms to govern the shipping policies and responsibilities for sellers and buyers who engage in international trade. CIF is one of the incoterms that we use if goods move via sea or inland waterway transport only. This is a conventional method of shipping. Basically, exporters who have direct access to ships will use CIF. Under CIF, the seller is responsible for specific protections for an order. After all, CIF is considered a more expensive option when buying goods.

CIF is an expense borne by a seller to cover the costs, insurance, and freight. We can use CIF only for sea and inland waterways but cannot use for air, rail and road transit. Basically, The seller is responsible till the goods are loaded onto the ship but Once the ship loads, the buyer becomes responsible for all. After all, The seller is liable to pay charges such as maintenance of goods, inland transit, agent’s fees for handling the logistics division, terminal charges, custom clearing charges, coverage charges, loading charges, ocean freight charges, damages & so on.

Actually, CIF incoterm is similar to free on board (FOB) shipping with the primary difference being who assumes responsibility for the goods during transit. In other words, The exact details of the sales contract will determine when the liability for the goods transfers from seller to buyer. In most cases, the seller’s obligation ends once cargo loading is complete. However, a buyer may stipulate that the seller is responsible until the goods reach a port of import or even their final destination.

Following the terms in the sales contract, once the goods change hands, the buyer must pay the agreed price and must cover any additional transportation, inspection, and licensing costs. Other expenses include customs duties, taxes, and the shipment of goods to their final location.