Cost, Insurance and Freight (CIF)

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Cost, Insurance, and Freight (CIF)

What is CIF?

Cost, Insurance, and Freight (CIF) is an Incoterm used for international shipments by sea or inland waterway. Under CIF, the seller pays the cost of freight and procures marine insurance for the goods while in transit to the named destination port. Risk of loss or damage, however, transfers from the seller to the buyer once the goods are loaded on board the vessel.

How CIF works

CIF defines the split of costs, responsibilities, and risks between seller and buyer for sea transport:

  • Seller pays:
  • Export licenses, inspections, packaging, and export customs formalities
  • Loading charges at the seller’s port
  • Sea freight to the named destination port
  • Marine insurance covering the buyer’s risk during carriage to the destination port

  • Proof of delivery and shipping documents

  • Buyer pays:

  • Import customs clearance, duties, and taxes at the destination port
  • Unloading at the destination terminal and onward transport to final destination
  • Any insurance claims handling once shipment is in buyer’s risk custody

Transfer points:
– Risk transfers from seller to buyer when goods are on board the vessel.
– Cost transfer (seller’s freight and insurance obligations) ends when goods reach the named destination port.

Special considerations

  • CIF applies only to shipments by sea or inland waterway; it cannot be used for air or multimodal transport.
  • Because risk passes at loading, situations where goods sit in containers before vessel loading can create gaps: the buyer bears risk for damage while goods await loading even though the seller arranged insurance for carriage.
  • CIF differs from CFR (Cost and Freight) in that CFR does not obligate the seller to obtain insurance.
  • CIF is similar to CIP (Carriage and Insurance Paid To), but CIP applies to any mode of transport and has different insurance obligations.

CIF and Incoterms

CIF is one of the Incoterms established by the International Chamber of Commerce (ICC). Incoterms clarify obligations, risk transfer, and insurance minimums. Under Incoterms 2020, sellers must obtain a broader level of insurance under CIF than was required previously.

CIF vs. FOB

  • CIF (Cost, Insurance, Freight): Seller pays freight and must obtain marine insurance to the destination port; risk transfers at vessel loading.
  • FOB (Free on Board): Seller delivers and loads the goods onto the vessel; risk transfers at loading, but the buyer normally arranges and pays for freight and insurance from that point. Specific terms can be negotiated between parties.

Example

A retailer orders 1,000 TVs under CIF to a named port. The seller loads the goods onto the ship and pays freight and marine insurance to the destination port. Risk transfers to the buyer once the goods are on board. If the cargo is damaged at sea, the buyer files a claim under the seller’s insurance policy because the seller procured the cover.

FAQs

  • Does CIF include duty?
  • Export duties and formalities are the seller’s responsibility; import duties and taxes at the destination port are the buyer’s responsibility.
  • When should I use CIF?
  • Use CIF for sea or inland waterway shipments when the buyer prefers the seller to arrange and pay for freight and basic insurance. It’s less suitable when goods will be stored or handled before vessel loading or when multimodal transport is required.

Bottom line

CIF assigns freight and insurance procurement to the seller for sea shipments while passing the risk to the buyer at the point of loading onto the vessel. Parties should clearly specify the named port, insurance level, and any additional responsibilities in the contract to avoid gaps in coverage or unexpected costs.