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Both the above are two different forms of international shipping agreements where the cost sharing and the rules and responsibilities of both buyer and seller of goods are defined. The seller will take care of the expenses about the costs, insurance, and freight of the goods, and as soon as the buyer receives the goods, the responsibility will pass on to the buyer. The seller is responsible for all the related costs and liabilities (if any) until cost insurance and freight meaning the buyer receives the goods.

Since the buyer assumes the risk only when the cargo has been loaded on the vessel, certain situations may not be suitable for a CIF agreement. For example, with containerized cargo shipments, the goods may sit in a container for days before being loaded onto the vessel at the seller’s port. Under CIF, the buyer would be at risk since the goods would not be insured while they sit in the container waiting to be loaded on the vessel. As a result, CIF agreements would not be appropriate for shipments, including containerized cargo.

When Not to Use CIF Incoterms

The difference between the two is that CIF requires marine insurance to be included, paid by the seller, that provides protection against any damages to the goods. When using the delivery term CIF, the seller is responsible for adding insurance to the cargo. The final CIF cost includes the merchandise price plus 10% of the commercial value of the goods. 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.

Cost, Insurance, and Freight (CIF) Incoterms® explained

• In most cases, the seller’s obligation ends once cargo loading is complete.
• CIF is one of the international commerce terms known as Incoterms which are common trade rules developed by the International Chamber of Commerce (ICC) in 1936.
• CIF agreements delineate specific points at which the seller’s responsibilities for costs and risks shift to the buyer, which is essential for both parties to comprehend.
• Each type of contract will cover different circumstances and much depend on your experience with international trade.
• When dealing with containerized cargo, CIP is the recommended alternative to CIF.
• 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.

Its widespread use is due to the clear responsibilities it assigns to sellers and buyers. With CIF, sellers cover shipping and insurance costs to the port of destination. This makes logistics easier for buyers, who benefit from reduced upfront burdens and less complexity. Buyer’s obligations with CIFThe buyer is responsible for all aspects surrounding the import of the goods. This includes import taxes, customs fees and any further transportation costs if the goods need to be transported into the country, for example.

Comparing CIF with Other Incoterms

• When renting a full ship for the carriage of products, it is more affordable to employ the CIF import method (FCL).
• 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.
• This makes DDP a more comprehensive term for buyers, as it reduces their logistical burden and financial risks​ .
• If you need fulfillment or shipping support and want to partner with DCL Logistics, we’d love to hear from you.
• So long as you specify which set of rules you’re using, there’s no obligation for you to use the latest set of rules in a contract.
• The receiver—or buyer—assumes responsibility once the goods are loaded on the vessel.

Within this, it also outlines the seller’s responsibilities for their portion of the journey. Cost, insurance, and freight is a specific agreement that was developed to help buyers and sellers. Plus, we’ll go into the different responsibilities buyers and sellers have, and more. There are 11 Incoterms® rules in total, and CIF – standing for cost, insurance and freight – is one of four that relate only to waterbound transportation. In common practice, the CFR Incoterm is often preferred by buyers if they are able to secure better cargo insurance coverages. This is because unlike CIF, insurance isn’t a seller’s obligation under CFR and can also be acquired by the buyer.

Does CIF Include Duty?

Another difference between CIF and CIP lies in the level of insurance coverage. CIF requires the seller to obtain minimum insurance coverage, typically 110% of the invoice value, which may not cover all potential risks. CIP, however, requires the seller to provide more comprehensive insurance coverage, typically aligned with the Institute Cargo Clauses (A), which offer wider protection. 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.

The receiver—or buyer—assumes responsibility once the goods are loaded on the vessel. All remaining costs including those for unloading and any further transportation costs are assumed by the receiver or buyer. If the buyer has requested the seller to provide assistance in obtaining information or documents needed for the buyer to effect insurance, and transit and import clearance, then the buyer must reimburse the seller’s costs. Under CIF, the seller is responsible for the cost and freight of bringing the goods to the port of destination specified by the buyer.

The seller’s obligations are fulfilled when the goods are delivered to the carrier or another person nominated by the seller at the named destination. The CIF term is used exclusively in sea freight and includes all costs up to the destination port. The exact details of the sales contract will determine when the liability for the goods transfers from seller to buyer.

Duty charges for exporting the goods from the seller’s port of destination are the responsibility of the seller. However, duty charges at the buyer’s port of destination (import duties) are the responsibility of the buyer. Cost, Insurance, and Freight is an international trade term that defines the responsibilities of parties involved in shipping goods. The bill of lading serves as a receipt for the goods, a contract of carriage, and a document of title. It’s important to note that while CIF includes insurance, the coverage is usually minimal. If the buyer desires more protection, they must either arrange additional insurance or negotiate different terms with the seller.