Cost, Insurance, and Freight Value (CIF)

What Is CIF (Cost, Insurance, and Freight)?

Cost, Insurance, and Freight (CIF) is a shipping agreement specifically for freight traveling via waterway, sea, or ocean between two international parties in which the seller will cover the costs of insurance and freight of the buyer’s order while that order is in transit.

Once the cargo has been delivered to the port of destination, the financial responsibility falls onto the buyer of the goods. If any damage or loss happens to the cargo before reaching the buyer’s port, the seller will be liable for the cost.

Cost, Insurance, and Freight (CIF) Example

Let’s say your e-commerce store sells children’s toys, and to make these toys, you need to order a plastic piece that is manufactured in another country. Let’s also say that it is getting near the holiday season, so you order this piece in bulk and it has to be transported via a cargo ship.

But, while this cargo ship travels to your port, it encounters a major storm in the ocean, and your necessary plastic pieces are dropped into the ocean. Under the CIF agreement, you would file a claim with the seller’s insurance company so that they cover the cost of the goods you never received.

Let’s say in a different example, this ship made it to your port. However, while unloading your goods a fire broke out on the ship and it damaged the plastic pieces you ordered. In that situation, you would be financially responsible for the damage since the products did in fact arrive to your port.

Seller And Buyer Responsibilities

For a CIF agreement to take place, the seller must:

  • Pay for packaging costs
  • Provide inspections for the products
  • Pay fees for customs, duties, and taxes
  • Pay the cost of shipping the freight
  • Pay the cost of shipping insurance
  • Cover the cost of any damages to the goods being delivered
  • Purchase an export license for the product

Once the goods are at the port of the buyer, they are in charge of:

  • Unloading the product at their port
  • Delivering the product from the port to another delivery site
  • Paying any custom duty charges for importing goods
  • Paying for any additional costs associated with getting the goods to their final destination.

Difference between CIF and CIP ( Carriage and Insurance Paid to)

The main difference between CIF and CIP agreements is that CIF agreements are limited to only shipments that occur via a body of water. CIP agreements can include trucking and air transportation.

Related Shipping Terms

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