CIF (Cost, insurance, and freight) is an international shipping contract that shows the amount reimbursed by a seller to include the cost, insurance, and freight of a purchaser’s order, whereas the consignment is in shipment. CIF is only applicable to items sent through sea, waterway, or ocean. The products are shipped to the buyer’s port designated in the sales agreement. Once the products are kept in the container, the damage or loss risk is relocated to the buyer from the seller. Moreover, cargo insurance and reimbursement for freight are the seller’s accountability. In this post, you will find in detail what is CIF, its features, important terms, the differences between CIF and FOB, buyers’ and sellers’ responsibilities, and more.
What is CIF?
The full form of CIF is Cost, Insurance, and Freight. These are the charges or fees a seller reimburses to cover the CIF of a buyer’s order when it is on the way. And only commodities or items shipped by sea, water, or ocean are entitled to CIF.
What are the features of CIF?
- The ICC (International Chamber of Commerce) has fixed CIF like an Incoterm. These terms can be compared to domestic terms but have international applicability.
- CIF is an international shipping contract that identifies the shipment of goods between a producer and a wholesaler and designates the liable authority for the goods throughout shipment.
- CIF describes the duty of the seller for the goods handed over to the buyer.
- Only inland oceans and rivers are permitted to use CIF to send products.
- The seller pays these charges, and the goods are not considered fulfilled till they do not reach the buyer’s hands.
- It is equal to paying for insurance and transport.
What are the terms of CIF?
- CIF (Cost, Insurance, and Freight) will be utilised by exporters having straight entry to ships.
- In the time period given in the buying contract, the seller is bound to ship the items.
- Once the items get loaded, the seller’s accountability breaks off. The selling contract may be specified diversely.
- The client has to pay as per the conditions of the buying contract, involving additional transport, checking, registration fees, import duties, and various charges.
What are the differences between CIF and FOB (Free on Board)?
- The difference between these two is the seller’s accountability throughout the items’ travel.
- In the Cost, Insurance, and Freight, the seller is completely liable for sending the goods and any consorting responsibilities and charges, which include freight and insurance.
- When the goods have been placed onto the ship or have gone beyond the ship’s line, the seller is free from responsibility. And, following that course, the buyer takes up all the responsibility.
- CIF contracts are costlier than FOB, as the client can negotiate a reduced freight and insurance cost with a logistics firm of their selection for the FOB.
What is the buyer’s liability during CIF?
The buyer’s responsibility is to unload the goods at the port terminal and take them from the airport to the delivery place. Later, customs duties and different costs are added to imported goods. Offloading, transport, and delivery charges for items to their final stop are some of the liabilities.
What is the seller’s liability during CIF?
The seller should buy the item’s export consent together with the fees and contracts linked to moving or shipping the goods. To protect the order’s total cost, the seller needs to ensure the safety of the items being offered. The seller should also bear or cover any ruination or loss of the items.
When is CIF used?
CIF can only be regarded as transporting products via river or sea, not including air shipment. CIF is a good choice for customers who ignore insurance and freight charges and accept liability for outside delivery. In these cases, CIF is employed.
Who is responsible for paying CIF freight?
The seller should reimburse for the charges of sending or shipping the consignment and insure the shipment until the products have been shipped to the buyer’s dockyard.
Does CIF have any duty?
Duties for transporting the goods from the seller’s dockyard are the liability of the seller. Moreover, import duties at the buyer’s dockyard are the accountability of the buyer.
When should I use CIF?
CIF can only be utilised when sending items through the waterway or ocean, signifying CIF cannot be employed for air shipment. CIF can be simpler for buyers who do not wish to face any problems of getting insurance, paying freight fees, and supposing all of the liability for shipping globally.
The Best Example to Understand What is CIF
For example, a buyer has ordered a thousand flat-screen TVs from Samsung, employing a CIF contract to Busan, a South Korean port. Samsung has sent this order to the port and loaded TVs onto the ship for transit. Once loading is finished, the damage or loss risk goes from Samsung to the buyer. In return, Samsung has bought insurance and reimburses the shipping charges until the ordered items approach the buyer’s destination port.
While the shipment is on its way, a fire breaks out in one of the consignments. The consignment is lost because of the fire and the water throughout firefighting attempts. As a CIF contract was there, the buyer could file an insurance claim to cover the cost of the lost items.
Final Words
On the whole, CIF (cost, insurance, and freight) explains the seller’s liability for the shipping and freight costs and makes sure the consignment is shipped through a waterway or ocean. CIF signifies that the seller is accountable for the charges of sending the consignment and getting insurance to secure the buyer from any harm to the items throughout transport. Moreover, the buyer considers liability for the items once the shipment has come to the buyer’s port. Also, if you wish to know more about what is CIF‘s further process, you can contact Amazon Global Selling- Your ultimate destination for all international shipping needs.