The CIF (Cost, Insurance, and Freight) incoterm is a trade term that represents the buyer's obligation to pay for the cost of transporting goods from the seller's location to the port of destination. It is commonly used in international trade for the transportation of goods by sea.
Under the CIF incoterm, the seller is responsible for arranging and paying for the transport of the goods to the port of destination. The seller is also responsible for obtaining insurance coverage for the goods during transit. The buyer is responsible for paying the cost of the goods, as well as the freight and insurance charges.
One of the main advantages of using the CIF incoterm is that it allows the buyer to have control over the transportation of the goods, as the seller is responsible for arranging the transport. This can be especially useful for buyers who are not familiar with the logistics of international shipping.
Another advantage of the CIF incoterm is that it allows the buyer to transfer the risk of loss or damage to the goods to the seller once the goods are loaded onto the vessel at the port of origin. This means that if the goods are damaged or lost during transit, the seller will be responsible for covering the losses, rather than the buyer.
There are a few important considerations to keep in mind when using the CIF incoterm. Firstly, the seller must obtain insurance coverage for the goods that is adequate to cover the value of the goods and the cost of the transportation. Secondly, the buyer must ensure that they have the necessary documents, such as a bill of lading, to take possession of the goods at the port of destination.
In summary, the CIF incoterm is a useful trade term for buyers and sellers who are engaged in international trade by sea. It allows the buyer to have control over the transportation of the goods and transfers the risk of loss or damage to the seller. However, it is important to carefully consider the responsibilities of both parties and ensure that necessary documents and insurance coverage are in place.
Cost, Insurance, and Freight (CIF) Definition, Rules, and Example
This is primarily due to two main factors. Under That means that if you ship under DAP by airway, the buyer must pay duties and taxes at the airport where the goods have arrived, even if you have to arrange for transportation. The buyer should note that under CIP the seller is required to obtain insurance only on minimum cover. LCL may also reach hundreds of dollars. These cookies do not store any personal information.
This is particularly useful for Xing for stateless applications without user sessions. It does include all export requirements. In the case of CIF term, the sea freight is prepaid, paid by the consignee to the consignor, and the consignor is entrusted to arrange the freight, then the freight forwarder is selected by the consignor. Purchasing under FOB terms, the freight is the responsibility of the buyer so that will have to be contracted separately. Tenaxx Logistics, the top transportation and logistics company in Ontario, Canada. For new importers, we do not recommend using FOB shipping because they lack the experience and ability to deal with international logistics contingencies.
When to use CIF Incoterm? For exported goods, we recommend sellers to use CIF shipping, CIF shipping sellers can have the opportunity to earn more profits. When dealing with containerized cargo, CIP is the recommended alternative to CIF. Insurance The seller must obtain cargo insurance. Therefore, during this period, the CIF risk of the shipment is borne by the seller. A seller should use CIF when he holds expertise in local customs and can handle the charges incurred in CIF for freight and insurance at more economic rates as compared to the buyer.
Pay for import clearance and formalities licenses, security, official documentation. Advantages and Disadvantages for the Buyer When trading under a CIF agreement, there are significant advantages for the buyer, making the purchasing process easier. According to the meaning of CIF, the seller is responsible for chartering or booking energy and paying the sea freight. For some small buyers, or e-commerce platform sellers, Amazon sellers, are not proficient in international logistics, or how to choose a good shipping company no matter when they import from China or from Cambodia, Malaysia, India, or Thailand. How to buy cargo insurance under CIF? Importers can choose their own carrier, freight forwarders, routes, and the best loading ports. The quantity of pieces per outer and inner packing unit is also checked.
This means that the seller will bear the cost of shipping and insurance up to the designation. The seller bears all risks involved in bringing the goods to and unloading them at the terminal at the named port or place of destination. Get a better idea of which term is right for your business in this Incoterms® comparison of CIF versus FOB. Even though the seller pays for insurance during the main carriage, the risk is transferred to the buyer at the time the goods are on board. In some instances, exporting countries require specific markings on their products or packaging. CIF Ex Tackle: It means that after the goods arrive at the port of destination, the seller only pays the cost of lifting the bilge of the ship until the ship is unloaded from the hook.
What are the similarities between CIF TERM and FOB TERM? CIF cannot be used for air transport. For a small number of goods, the division of responsibilities is also different from that of air freight. For CIP, they must insure the full transportation. CIF stands for Cost, Insurance and Freight, a commercial rule under incoterms 2020 wherein the expenses are borne by the seller -- from delivering goods and bearing settlement charges for carriage and insurance till the designated port. CIP Carriage And Insurance Paid To DAP Delivered At Place All three Incoterms of the D-Group are intermodal Incoterms. If the buyer fails to instruct the seller regarding the destination port, the buyer bears the damage and loss. Buyers Responsibilities One the cargo is loaded onto the vessel, the seller transfers the shipment and all risks to the buyer.
Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements. Duties and taxes for export. The seller holds responsibility that goes well beyond ensuring the cargo is placed on to a container ship. It is the buyer who assumes the risks from then on. Can CIF Incoterms be used for small parcel shipments? Once the goods have been delivered to the buyer's destination port, the buyer must pay the agreed price for the goods and is responsible for any import fees, taxes, or custom duty charges. The buyer should note that under "Carriage and Insurance Paid To" the seller is required to obtain insurance only on minimum cover.
Here Are the Incoterms You Can Use for Air Freight
Had the buyer understood the terms of CIF, this issue would not have occurred. The seller is responsible for chartering and booking space, paying the freight from the port of shipment to the port of destination, applying for water transportation insurance, and paying insurance premiums. The most common understanding is that the suppliers in Bangkok and Shanghai are responsible for sending the container or LCL goods from the factory or warehouse to the destination port, and paying the sea freight and purchasing insurance. The seller has to bear the fees for loading and shipping goods to the port. Why is FOB shipping widely used? A quick re-work might still be possible ifproblems are found.
What is CIF：Cost, Insurance, and Freight (CIF) Incoterms ，Shipping Guide Updated 2022
If the buyer requires a higher level of insurance coverage, it will need to explicitly agree with the seller, or make additional insurance arrangements on its own. Of course, it is not easy to find a freight forwarder with scale, compliance, and good price in the current situation. Just wait for the goods to arrive at the destination port, bring the customs clearance documents provided by the supplier, and let your customs clearance broker clear the goods fast. These international shipping terms determine who assumes the responsibility and liability for the goods at a given point while the goods are in transit. To sign up to the School of Export If you already have a profile, The TFSA School of Export currently has 14 modules, about 9 hours of Export Training eLearning material.