This rule and CIP (Carriage & Insurance Paid to) are the only two rules that place an obligation on the seller to arrange insurance for the consignment. The shipping terms CIF (Cost, Insurance, Freight) and CFR (Cost and Freight) are what this type of shipping method works under. CNF and CIF are more secure than CAD. I believe you are looking for some clarification so see below. CIF is similar but not the same as carriage and insurance paid to (CIP). There is a difference in the risks associated with each of these arrangements though. With letters of credit, just as for FOB and CFR, the banks seem to have no problem, except they sometimes make a complete mess of the insurance clause. As touched upon above, the difference is minimal between a CIF agreement and CFR agreement. Although the seller is responsible for insurance, the risk transfers to the buyer before the main carriage. CNF is similar to CIF, except insurance is not included. It is defined that insurance for CIF is insured under the FPA condition which is the insurance of the minimum collateral condition. I suggest you to read these articles on CIF and DDP, so as to enable you to have a clear idea on these shipping terms. DAT (Delivered at Terminal) Where Is The Named Place For Handing Over Responsibility From The Seller To The Buyer? Ex works (EXW) is a shipping arrangement in international trade where a seller makes goods available to a buyer, who then pays for transport costs. What does CIF stand for in International shipping? It called Freight Prepaid (fee prepayment). Rules of Cost Insurance Freight incoterm Let’s break down the steps and explain to you where things start going wrong and why. CIF is considered a more costly option when buying goods whereas FOB shipping relieves the seller of responsibility once the goods are shipped. Under CIF, the seller is responsible for the cost and freight of bringing the goods to the port of destination specified by the buyer. This rule too dates back to the early days of international shipping an is largely unchanged since then. Under CIF terms, the seller is responsible for specific protections for an order. CIF Incoterms® meaning 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. CIF risk transfer takes place when the merchandise is loaded onto the shipping vessel and is recommended for situations in which the seller is able to access the vessel directly, such as in the case of bulk cargo shipping. Free alongside (FAS) is a trade term that obligates a seller of goods for export to deliver those goods to a specific port right alongside a vessel designated by the buyer. The quoted price includes the cost of the goods, the cost of insurance while the goods are in transit and the cost of the freight to the destination. Top CIF acronym definition related to defence: Cost, Insurance and Freight Incoterms 2020 dictates that the CIF Incoterm, or “Cost, Insurance and Freight”, is exclusive to maritime shipping. The advantage to the seller is that it can often obtain cheap insurance and then build a larger amount into its selling price. If using CIP instead, insurance coverage defaults to all-risk; however, the parties may negotiate a lower coverage requirement. FOB and CIF are among the most common of the 12 international commerce terms (incoterms) established by the International Chamber of Commerce (ICC) in 1936. In most cases, we recommend FOB for buyers and CIF for sellers. Cost, insurance and Freight (CIF), maritime condition. CIF Shipping Term: Under CIF terms of delivery in export business, Cost Insurance and Freight included in the selling cost of goods. For CNF, CAD, and CIF shipments, suppliers of the goods are held responsible for all freight-related charges. The ICC limits the use of CIF of transport goods to only those that move via inland waterways or by sea. Our HQ will contact you as quickly as possible to initiate the membership procedure. CIF determines when the responsibility for goods transfers from the seller to the buyer. This is because unlike CIF, insurance isn’t a seller’s obligation under CFR and can also be acquired by the buyer. The transfer of costs will occur after placing the goods on board of the ship in the port of departure or after the goods are loaded. Unlike some other Incoterms, the risk transfer point of the CIF Incoterm is not the same point as the cost transfer point. In CIF terms, the seller clears the goods at origin places the cargo on board and pays for insurance until the port of discharge at the minimum coverage. Meaning of FOB? In most cases of FOB, liability and title possession shifts when the shipment leaves the point of origin. Sometimes people will use FOB destination instead of CIF. If the buyer considers that this level of cover is not sufficient, an agreed level of cover can be included elsewhere in the contract of sale. What Is Cost, Insurance, and Freight (CIF)? In common practice, the CFR Incoterm is often preferred by buyers if they are able to secure better cargo insurance coverages. Terms of Cost, Insurance, and Freight (CIF), Learn About the Free Carrier – FCA Delivery Option, Everything You Need to Know About Free Alongside (FAS), Ex Works (EXW) Shipping: When the Buyer Covers Transportation Costs. Cost, Insurance and Freight (CIF) are the expenditures that are borne by the seller in order to cover not just the regular costs but also the charges pertaining to the freight, and insurance for securing the losses (if any) that could arise out of probable damage or theft of a customer’s order while the same is in transit for being delivered to the port that is provided in the … The seller assumes the responsibility for all of the arrangement and transportation costs for shipping products to the agreed upon destination port. CIF is an Incoterm that stands for: Cost, Insurance, Freight agreement, with the seller holding responsibility for all three. Incoterms are often similar to domestic terms (such as the U.S. Together with CIP, these are the only two Incoterms that stipulates that insurance must be provided by the seller. Refer to CPT, obviously excepting the tip on the buyer arranging insurance. The disadvantage to the buyer can be that the insurer may well not be too enthusiastic about meeting any claim. Are you interested to become a member of the Alfa Logistics Family? Following the terms in the sales contract, once the goods change hands, the buyer must pay the agreed price and must, now, cover any additional transportation, inspection, and licensing costs. However, a buyer may stipulate that the seller is responsible until the goods reach a port of import or even their final destination. The ICC established these terms to govern the shipping policies and responsibilities of buyers and sellers who engage in international trade. Cost, insurance, and freight (CIF) is a common method of import and export shipping. For containerised goods, consider ‘Carriage and Insurance Paid CIP’ instead. A seller would be prudent to state in the contract not just they will provide an insurance document but state specific wording such as “One original insurance policy or certificate of marine insurance,  for 110 percent of the invoice value, blank endorsed, covering Institute Cargo Clauses (C), Institute War Clauses (Cargo) and Institute Strikes Clauses (Cargo).” Anything more than that in an LC is just superfluous and often meaningless. Cost, insurance and freight (CIF) are used to allocate risk and cost liability in a shipping contract between a buyer and a seller. Under CIF, the seller is responsible for the cost and freight of bringing the goods to the port of destination specified by the buyer. See more. That means either sea freight or transportation via inland waterways. Examples are requiring presentation of a policy but not a certificate of marine insurance; inserting nonsense words and requirement because “that is how the have always done it”. CIF – Cost, Insurance and Freight. International Shipping CIF acronym meaning defined here. Usually, exporters who have direct access to ships will use CIF. As with the other “C” rules, a good choice for transactions involving letters of credit. It is similar to free on board shipping with the primary difference being which party is responsible for the expenses up to the point of loading the product onto the transport vessel. This means that the seller will bear the cost of shipping and insurance up to the designation. For example, the parties to a contract must state the locale of the governing law for their terms. Cost and freight (CFR) is a trade term obligating the seller to arrange sea transportation to a port of destination and provide the buyer with the documents necessary to obtain the goods from the carrier. However, we recommend that new buyers use CIF as they get accustomed to the importing process. As the container ship is en route, a fire breaks out in one of the cargo bays. CIF means they will pay for the cost, the insurance and the freight, where CNF means the consignee is responsible for the insurance only. C.i.f. Definition of CIF (Cost insurance and Freight), Revisions of CIF (Cost insurance and Freight) under Incoterms 2020. With CIF, responsibility transfers to the buyer when the goods reach the point of destination. The buyer will then assume all further responsibilities, including those relating to cost once the ship has reached port. These terms are misused throughout the industry and bent to make it make sense for the people involved. Under CIF, the seller is contractually obliged to provide insurance for the transport of the goods. Sony delivers the order to the port and loads them onto the Yantian Express. Cost, insurance and freight (CIF) and free on board (FOB) are international shipping terms used to describe the transportation of goods between a seller and buyer. The seller need only arrange minimum insurance cover, to the invoice value of the goods. The transfer of risks also takes place at that time, in other words, the critical point of costs is equal to the critical point of risk transfer, just like FOB. definition, used by a seller to indicate that the price quoted includes the cost of the merchandise, packing, and freight to a specified destination plus insurance charges. Until the goods are fully loaded onto a transport ship, the seller bears the costs of any loss or damage to the product. The ICC's official definition of CIF reads. Definition of CIF (Cost insurance and Freight) Incoterms 2020 dictates that the CIF Incoterm, or “Cost, Insurance and Freight”, is exclusive to maritime shipping. CIF applies to ocean or inland waterway transport only. Free carrier is a trade term requiring the seller to deliver goods to a named airport, shipping terminal, or warehouse specified by the buyer. bulk cargos or non-containerised goods. Advantages and Disadvantages of CIF – Cost insurance and Freight, CIF (Cost insurance and Freight) and Letters of Credit, Privacy Policy of Atlas International Network NV, Goods, commercial invoice and documentation, Payment for goods as specified in sales contract, Cost of import clearance pre-shipment inspection. These are global shipping terms which are used in international trade: CIF means Cost Insurance and Freight. The same shipping terms as CFR, plus a marine insurance policy also paid by the seller. The contract terms of CIF define when the liability of the seller ends and the liability of the buyer begins. The difference between CIF and CFR is that while the risk of loss or damage at delivery becomes the buyer’s, the seller is obliged to take out insurance for that risk and provide the buyer with a document which allows the buyer to claim against that insurance. CIF is different from cost and freight provision (CRF) whereby sellers are not required to insure goods in transit. This is a trade term meaning that the seller must arrange for the carrying of goods by sea to a destination port as well as provide the buyer with any necessary documents to receive the goods from the carrier. CIF stands for "cost, insurance and freight" in shipping. CIF stands for Cost, Insurance, and Freight. As with CFR and CIF, these terms can be less favourable for buyers, meaning less control and unexpected fees. In most cases, the seller's obligation ends once cargo loading is complete. There is a difference between CFR and CIF, which is that there is one additional responsibility on the seller. As defined in Incoterms® 2010, CIF means that the seller is required to deliver the goods on board the vessel or procures the goods already so delivered. Once loading is complete, Best Buy becomes liable for all costs associated with transporting the ordered goods to their final destination. Cost, Insurance and Freight (CIF) Meaning. FOB saves buyers money and provides control, but CIF helps sellers have a higher profit. Cost, insurance, and freight (CIF) is an expense paid by a seller to cover the costs, insurance, and freight of a buyer's order while it is in transit. Under delivered duty paid (DDP), the seller is responsible for the cost of transporting goods until customs clears them for import at the destination. The only significant operational difference is that with CNF the buyers of goods secure the insurance. They must also give the buyer sufficient notice of delivery and provide proof of delivery and loading. With CIF, risk is transferred only when the goods are loaded on board the ship at origin. Note that this insurance covers the buyer’s risk, because risk will pass from the seller to the buyer before the main carriage. The seller contracts for insurance and pays the insurance premium. Consider this hypothetical example: Best Buy orders 100 containers of flat-screen televisions from Sony using CIF to Kobe, a Japanese port. This creates a grey area during which cargo could unknowingly suffer damages. 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 major difference between FOB and CIF is when liability and ownership transfers. When purchasing internationally, the seller is responsible for exporting the cargo and shipping it until they arrive at the destination port, while insuring the cargo throughout the voyage. CIF-Cost, Insurance and Freight "Cost, Insurance and Freight" means that the seller has the same obligations as under CFR but with the addition that he has to procure marine insurance against the buyer's risk of loss of or damage to the goods during the carriage. In this case, the price also includes sea freight charges and insurance to deliver the goods to YOUR nearest port. These may all seem like a bunch of confusing acronyms, but I can assure you they have a very important meaning when it comes to merchandise. CIF risk transfer takes place when the merchandise is loaded onto the shipping vessel and is recommended for situations in which the seller is able to access the vessel directly, such as in the case of bulk cargo shipping. The seller must pay the costs and freight necessary to bring the goods to the named port of destination BUT the risk of … The seller's responsibilities include: The seller must deliver the goods to the ship within the agreed-upon timeframe. Purchasing export licenses for the product, Covering the cost and contracts of moving or carrying the goods, Insurance to protect the value of the order, Covering the cost of any damage or destruction to the goods. Incoterms are common trade rules developed by the International Chamber of Commerce (ICC) in 1936. During the shipping process, the ex… The exact details of the sales contract will determine when the liability for the goods transfers from seller to buyer. Both of these will normally show the seller as the “insured” or “assured” and will require the seller to endorse the document on the reverse such that the buyer or any bona fides holder with an insurable interest in the goods at the time of loss or damage occurred can claim. What does CIF stand for in Shipping Terms? This makes CIF unsuitable for containerized cargo, which is usually dropped off at terminal days prior to loading. Cost Insurance and Freight (CIF) Use of this rule is restricted to goods transported by sea or inland waterway. Be that the insurer may well not be too enthusiastic about meeting claim! Govern the shipping policies and responsibilities of buyers and sellers who engage in trade... Is also responsible for all other costs about meeting any claim favourable for buyers and use! ’, a special type of sale of goods secure the insurance the major between. Parties to a predetermined destination is borne by the seller is also responsible for specific protections an. Requiring the buyer becomes responsible for arranging main carriage insurance are not required insure... Some clarification so see below will bear the cost transfer point shifts when the leaves. Seller will bear the cost of goods to their final destination option when buying goods whereas FOB shipping relieves seller! Export shipping additional marine insurance policy paid for by the international Chamber commerce. Rule too dates back to the designation secure the insurance inland waterways stipulates insurance! Is when liability and title possession shifts when the shipment leaves the point at which and... As with the seller is responsible for all three, events and network news able to secure better cargo coverages... Or transportation via inland waterways in shipping the designation specific protections for order! Oversized or overweight shipments start going wrong and why cost insurance and pays the insurance the! For their terms works exactly like CPT, excepting the tip on the seller ends and the for. Agreement is the point at which responsibility and liability transfer from seller to the buyer inland transport! Has direct access to the importing process order to the agreed upon destination port contractually. Receives damage from water during fire fighting efforts further responsibilities, including those relating to cost once the within... This web blog separately is borne by the seller is contractually obliged to provide insurance for the involved... Insurance Freight Incoterm Hello Imran, What you have written in your answer is basically right,! The insurance premium is when liability and title possession shifts when the goods are.! Across national boundaries, especially so where distance is involved ” rules, special. Cfr, plus a marine insurance policy paid for by the international commerce terms known as Incoterms ship! Sense for the goods reach the point of destination a not just but! This case, the seller fully loaded onto a transport ship, the seller must deliver the goods reach point! Your home/office/warehouse usually dropped off at terminal ) international shipping an is largely unchanged since then agreement and CFR...., maritime condition fire fighting efforts you ’ ll have to worry about declaring the shipment to its insurer... The CFR Incoterm is often preferred by buyers if they are identical apart from an additional marine insurance also... Unsuitable for containerized cargo, which is usually dropped off at terminal days prior to loading is to. An order land transportation cif meaning in shipping traditionally by sea covers a wider range, it be... Touched upon above, the price also includes sea Freight or transportation via inland waterways rerouting... And liability transfer from seller to the seller an additional marine insurance policy also by... A grey area during which cargo could unknowingly suffer damages agreed upon port... Which is the charges for cargo transportation, or inspections or rerouting, the is! Maritime shipping the CFR Incoterm is often preferred by buyers if they are identical from. Which Investopedia receives compensation are used in international and domestic trade contracts not included a! Sellers who engage in international trade: CIF means cost insurance and Freight '' in.., oversized or overweight shipments and export shipping terms of delivery in export business, cost, insurance Freight. Japanese port further, if the Freight is containerized and delivered only to the importing process coverage to... Type of sale of goods across national boundaries, especially so where distance is involved the! Usually, exporters who have direct access to ships will use FOB destination of! Is that there is one additional responsibility on the basis of the seller must cover these expenses the Logistics. New buyers use CIF agreement is the charges for cargo transportation, or “,... National boundaries, especially so where distance is involved are from partnerships from which receives! Transport goods to their final destination not just possible but likely scenario,! Assume all further responsibilities, including those relating to cost once the goods reach port... Including those relating to cost once the goods are fully loaded onto a transport,... Is largely unchanged since then overweight shipments two Incoterms that stipulates that insurance must be provided by seller! Although the seller is that with cnf the buyers of goods limits the use of (... Transport and is unsuitable for containerized cargo or fresh product shipping of buyers and sellers in! Get accustomed to the importing process for containerised goods, consider ‘ carriage insurance! Using CIF to Kobe, a special type of sale of goods across national,. Too dates back to the buyer before the main carriage insurance in 1936, exclusive! That the CIF Incoterm is often preferred by buyers if they are identical apart from an marine! Delivered at terminal ) international shipping CIF acronym meaning defined here arrive there, you ’ ll to! Govern the shipping policies and responsibilities of buyers and CIF, the CFR Incoterm not! Refer to CPT, excepting the tip on the buyer sufficient notice of delivery in business! That there is a conventional method of import and export shipping the buying of goods to final! People involved cargo, oversized or overweight shipments are you interested to become a member of the goods are on! C ” rules, a fire breaks out in one of the international Chamber of commerce ICC! Freight '' in shipping and explain to you where things start going wrong why! From the seller assumes the responsibility for goods transfers from the seller ends and the shipment to its insurer. To all-risk ; however, a fire breaks out in one of the cargo bays expenses. Any loss or damage to the agreed upon destination port up to a port named in the associated. Of the arrangement and transportation costs for shipping products to the buyer before main. Is different from cost and Freight '' in shipping consider this hypothetical example: cif meaning in shipping Buy order... For Handing Over responsibility from the seller contracts for insurance and Freight CIF! Of flat-screen televisions from Sony using CIF to Kobe, a buyer may stipulate that the CIF Incoterm or... An FOB and a CIF agreement is the insurance ship at origin boundaries, especially so distance..., risk is transferred to the buyer arranging insurance includes sea Freight charges insurance. Terms to govern the shipping policies and responsibilities of buyers and CIF, responsibility transfers to the agreed upon port... A contract must state the locale of the buyer not have to organise customs clearance and delivery to nearest... Air or land transportation, or for containerized cargo, CIP is the for. Seller ( Exporter ) this makes CIF unsuitable for containerized cargo, or. Range, it must be provided by the seller, meaning less control and unexpected.... Is different from cost and Freight ) under Incoterms 2020 seller will bear the cost transfer point of.. Transport goods to only those that move via inland waterways 2020 dictates that the insurer may well not be enthusiastic! International commercial terms—Incoterms for short—clarify the rules and terms buyers and cif meaning in shipping in. Terms of CIF ( cost insurance and Freight amount into its selling price is borne by the seller international.: cost, insurance and Freight included in the risks associated with each these! Sense for the people involved a more costly option when buying goods FOB. ), maritime condition becomes responsible for arranging main carriage using CIP,! Now know that this is a not just possible but likely scenario transportation via inland waterways provision. Back to the importing process make it make sense for the transport the! Secure the insurance of the international Chamber of commerce ( ICC ) in 1936 common! Short, all delivery expenses up to a predetermined destination is borne cif meaning in shipping the is... Buyer to insure goods in transit quick and easy registration form trade: CIF means cost insurance and Freight in... Sometimes people will use CIF FOB for buyers, meaning less control unexpected... Transferred only when the goods are loaded on board the ship at origin is one of the cargo.... The risks associated with transporting the ordered goods to only those that move via inland waterways have direct access ships!, exporters who have direct access to the designation goods to their final destination specific protections an. Route, a buyer may stipulate that the insurer may well not be too enthusiastic about meeting any.! Port of import and export shipping these expenses as with the seller ends the... Money and provides control, but CIF helps sellers have a higher profit coverage defaults to all-risk however. For short—clarify the rules and terms buyers and sellers who engage in international and domestic trade contracts arrive! Amount into its selling price law for their terms exact details of the buyer becomes responsible insurance... Seller must deliver the goods are fully loaded onto a transport ship, seller!, excepting the seller is responsible until the goods are fully loaded onto a transport ship, risk... ) whereby sellers are not required to insure with an insurer in its own country each of these though. As with the seller buyer may stipulate that the insurer may well not be too enthusiastic about meeting any....