COST, INSURANCE AND FREIGHT (CIF)
Back to GlossaryDefinition
An Incoterms rule where the seller covers cost, insurance, and freight to a named port; risk transfers once goods are onboard.
Summary
Cost, Insurance and Freight (CIF) is an international trade term that defines the responsibilities between buyer and seller in shipping goods. Under CIF, the seller must pay for the goods' cost, arrange and pay for marine insurance, and cover freight charges to deliver goods to the buyer's designated port. However, the key point is that while the seller pays these costs, the risk of loss or damage transfers to the buyer once the goods cross the ship's rail at the port of shipment. This means the seller pays for shipping and insurance, but the buyer bears the risk during transit.
Usage Context
Understanding CIF is crucial when studying international trade, export/import procedures, shipping documentation, risk management in global supply chains, and international commercial law. It's particularly important for comprehending how costs and risks are allocated in international sales contracts.
Common Confusions
- Thinking the seller bears risk throughout the entire journey because they pay for insurance
- Confusing when risk transfers versus when costs are paid
- Believing CIF can be used for all modes of transport (it's only for sea and inland waterway)
- Assuming the insurance provided covers the buyer's full interests rather than minimum coverage
- Mixing up CIF with CFR (Cost and Freight) terms
