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Incoterms: Cost Insurance and Freight

Posted in Incoterms - 4 Jun 2018, 9:30 AM

Also known as CIF, it is a term well-known in a trading business. It is when the seller is required to arrange for the goods in carriages by sea to port. The seller also has to provide the buyer the necessary documents to get the goods there. Cost insurance and freight or CIF is only (and restrictively) applied if the goods are transported by sea or other waterways on the island

How Cost Insurance and Freight (CIF) works:

  1. The seller makes an arrangement and payment for the transportation that carries the goods to the named destination or port.
  2. The seller is in full charge of the delivery of the goods. They have to make sure that the goods are cleared for export.
  3. The seller also has to make sure that the goods are loaded on board the vessel.
  4. Just like what CIF stands for, the seller makes an arrangement and payment for the goods when they are carried to the agreed destination or port.

Other facts related to cost insurance and freight (CIF):

At first glance, it may seem like the whole thing about CIF is solely the responsibility of the seller. However, there are other facts that you need to be aware of, starting from the risk and other things related to this:

  1. There are risk transfers from the seller to the buyer. These risk transfers might occur on two possible occasions:
  • When the goods have been loaded on board.
  • Before the main carriage is there.
  1. Since a minimum level of cover is required just like with Carriage and Insurance Paid (CIP), the cost using the cost insurance and freight (CIF) might be unrealistic by commercial sense. This is why the level of cover must be discussed and agreed anywhere else in the commmercial agreement. The good thing about this type of insurance is the risk transfers from the buyer to the seller after the cargo have been landed on the board.
  2. Cost insurance freight (CIF) and Carriage Insurance Paid (CIP) have another similar thing besides the minimum level of cover that needs to be discussed. These two also put most of the responsibilities solely on the seller when it comes to arranging insurance for the goods before they are carried and transported to the agreed destination or port.

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