Cost, Insurance, and Freight (CIF) is an Incoterm used frequently in shipping and logistics to determine the tasks and responsibilities of shipments between buyer and seller.

In this brief guide, we discuss the definition of Cost, Insurance, and Freight and when it might best be used.

 

What does CIF mean?

CIF, or Cost, Insurance and Freight, is an Incoterm agreed between a buyer of goods and a seller of goods. It dictates how tasks, risks, and responsibilities will be split between the two parties at each stage of a shipment.

 

What does the CIF Incoterm dictate in shipping?

The CIF Incoterm dictates that:

  1. Under CIF, a large portion of the risk is given to the seller, who is responsible for clearing the goods for export and delivering them onboard the vessel at the port of origin .

  2. The seller also pays for transportation from the port of origin to the destination port.

  3. The seller must buy the minimum level of insurance for the goods to the port of destination.

  4. Once the goods are on board the vessel for the main carriage, the buyer takes on all risk. The buyer does not take on any costs until the goods arrive at the port of destination.

  5. From that point, the buyer is responsible for the rest of the shipment, arranging customs clearance, payment of any applicable duties and taxes, and final delivery.

 

CIF Shipping Obligations

It is very important to understand which responsibilities lie with which party when it comes to CIF shipping. Please find the obligations for each party below.

 

Obligations of the buyer

If you are the buyer, you are obliged to:

  • Handle customs clearance, import duties and taxes. UK importers will be required to use a Deferment account with HMRC to facilitate payment of duty and tax.

  • Pay for the cost of import clearance.

  • Pay for the goods as laid out in the agreed-upon sales contract.

  • Handle the discharge of goods at the port of destination and manage onward delivery.

  • Pay for destination port terminal handling fees, and onward delivery.

 

Obligations of the seller

If you are the seller, you are obliged to:

  • Handle export licences, export packaging, and export marking.

  • Handle customs formalities.

  • Manage documentation, including the commercial invoice and packing list.

  • Pay for loading charges at the port of shipment.

  • Pay for pre-carriage and delivery to port.

  • Arrange freight through to the port of destination as agreed with the buyer.

  • Pay for pre-shipment inspections.

  • Pay for agreed insurance coverage.

  • Provide proof of arrival/goods on board at the port of destination.

 

View the SEKO Guide to Incoterms

SEKO is a leader in Ecommerce logistics and international shipping logistics. We utilise our 30 years of experience and expertise to ensure your shipments are getting from A to B at the best possible cost to you, alongside the most suitable Incoterm for your shipment.

To learn more about Incoterms, consider reading our Incoterms Guide, where we answer questions and reveal more about their usage.