Buzz
CIF is a specialized term used in the import-export of goods. If you're not familiar with CIF, let's explore Cost, Insurance, Freight (CIF) in the following article.
Join Mytour as we delve into the world of CIF in import-export.
What is CIF?
CIF stands for Cost (goods cost), Insurance (freight charges), and Freight (insurance). It is a specialized term extensively used in import-export, prevalent in international trade contracts employing sea transport. CIF delineates responsibilities and risks between buyers and sellers in international trade. Sellers bear expenses for chartering ships and insuring until the unloading port.
CIF serves as a delivery condition, meaning delivery at the unloading port, usually specified with a particular seaport name.
Example: CIF: Haiphong implies the seller will purchase insurance and transport the goods to Haiphong port, CIF: New York...
When applying CIF conditions, it's essential to note that risks shift at the loading port, not the unloading port. Sellers only bear risks during loading and cover transportation costs, but they are not liable during sea transport.
The seller needs to purchase marine insurance, and they will send the insurance application along with the documentation to the buyer. If any risks occur during transportation, the buyer will be the beneficiary of the insurance purchased by the seller.
Delivery conditions in international sea transport Incoterms
Incoterms (short for International Commercial Terms) are a set of internationally recognized trade rules widely used across the globe. Incoterms govern rules related to prices and responsibilities of parties (seller and buyer) in international trade activities.
Key terms of Incoterms 2010:
- Group E (place of departure)
+ EXW (Ex-works place of departure) - Delivery at the factory
- Group F (Freight unpaid)
+ FCA (place of departure) - Handover to the carrier
+ FAS (port of departure) - Delivery alongside ship
+ FOB (port of departure) - Delivery on board
- Group C (Freight paid)
+ CFR (port of destination) - Cost and Freight
+ CIF (port of destination) - Cost, Insurance, and Freight
+ CPT (place of destination) - Carriage Paid To
+ CIP (place of destination) - Carriage and Insurance Paid To
- Group D (place of destination)
+ DAT (wharf) - Delivery at the dock
+ DAP (place of destination) - Delivery at the destination
+ DDP (destination point) - Delivery with duties paid
Including some common conditions for sea freight in import-export of goods:
ExWork (delivery at the factory): the entire responsibility for transportation lies with the buyer, from specifying the carrier to covering transportation costs. The buyer receives the goods at the seller's factory, then bears the costs, risks, and completes all necessary procedures to bring the goods into the importing country.
FOB (delivery on board): the seller is responsible for export procedures and delivers the goods to the export port for the buyer. The remaining responsibility, from transportation from the export port to the import port and to the destination warehouse, lies with the buyer.
CFR (cost and freight): similar to CIF conditions, but the seller does not purchase insurance for the goods.
DDP (delivery at destination with duties paid): similar to DDU conditions, but the seller pays import duties and taxes in the importing country. In this case, the buyer only needs to coordinate with the seller for import procedures and receive the goods.
DAP (delivered at place): this is a new delivery condition introduced in 2010 to replace the DDU terms. In contrast to EXW, the entire responsibility for transporting goods lies with the seller. The seller is tasked with loading the goods from their warehouse, completing export customs procedures, shipping the goods by international sea freight to the destination port, handling import customs clearance, and delivering the goods to the buyer's warehouse. The buyer's responsibility is solely to pay the import duties for the shipment.
Here, Mytour has shared information about what CIF means in import-export and the various delivery conditions in international maritime transport Incoterms. We hope that through this article, you will gain a better understanding of CIF in the export-import of goods by sea.
