Over the years, the ICC has made changes to the terms and guidelines for international trade. In 2020, the ICC made adjustments to the rules (called Incoterms 2020), which, in part, made changes to security requirements for shipments. Since the buyer assumes the risk only when the cargo has been loaded on the vessel, certain situations may not be suitable for a CIF agreement. For example, with containerized cargo shipments, the goods may sit in a container for days before being loaded onto the vessel at the seller’s port. Under CIF, the buyer would be at risk since the goods wouldn’t be insured while they sit in the container waiting to be loaded on the vessel.

Pourquoi choisir l’incoterm cif ?

From this point onwards, including through Customs, the buyer has responsibility for the goods. Conversely, with FOB the seller has responsibility for the goods until they pass the ship’s rail at the port of shipment. The buyer then takes responsibility for the goods from this point onwards (i.e., once they are on the vessel). Understanding Incoterms like Cost Insurance and Freight (CIF) is vital for anyone involved in international commerce. It helps clearly define costs, responsibilities, and risks, which in turn reduces conflicts and streamlines transactions.

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Let’s break it down so it actually makes sense in practice—not just on paper. Our team is dedicated to providing premium service for high-growth brands with a commitment cost insurance and freight meaning to trusted fulfillment solutions, quality and accuracy, customer satisfaction, and environmental responsibility. Our customers have access to a broad network of industry partnerships, EDI connections, retailer relationships, ERP, and ecommerce integrations.

• CIF is often used in conjunction with other logistic terms, such as Free on Board (FOB) and Delivered Duty Paid (DDP).
• CIF is ideal in scenarios where the buyer wants more control over the final leg of the transportation process.
• The bill of lading is another important document in CIF documentation, as it serves as proof of ownership and transportation of the goods.
• Whether you’re handling the seller’s side or managing a shipment at the buyer’s port, knowing exactly what your CIF agreement covers (and what it doesn’t) is critical.

There are various types of international shipping agreements, including CIF, FOB, and CFR. As a result, it’s important that buyers and sellers understand all of the legal terms within these agreements before engaging in international trade. In a CIF agreement, the seller is responsible for arranging and paying for the transportation of the goods from their location to the specified port of destination. This includes selecting the mode of transport, securing necessary documentation, and covering the costs involved.

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This insurance is based on the minimum coverage, which is the commercial value of the product, plus 10 %. The seller is also responsible for any export documentation and export licenses if needed. For instance, in the case of containerised or bulk cargo shipping, there could be a delay between when goods are prepared for shipment and when they are actually loaded onto ocean freight or inland waterway transport. As also highlighted above, they delineate the responsibilities and risks between purchasers and merchants during the transportation of goods across the sea or inland waterways. These International Commercial Terms (Incoterms) are crucial for businesses engaged in global trade, ensuring clarity in shipping agreements and responsibilities.

FCA Incoterms® 2020 Guide: Definition, Obligations & Risk Transfer

The use of a bill of lading helps to ensure that the goods are properly transported and delivered to their destination. By providing proof of ownership and transportation, the bill of lading can help to reduce the risk of loss or damage to the goods during shipment. In fact, a common mistake with Incoterms® is to use a traditional “sea and inland waterway only” rule such as CIF for containerised goods, instead of the “all transport modes” rule.

• The commercial invoice typically includes information such as the description and quantity of the goods, the unit price and total cost of the goods, and the amount of insurance and freight paid.
• When a buyer is invoiced a CIF price, they must only arrange the unloading of the goods, clearing them for import and transporting them from the port of destination to their address.
• Using the Incoterms rule CIF, the seller covers the cost of insurance AND freight to the named port of destination or place.
• As the other Incoterms, the CIF Incoterm only determines which party pays for the freight transport, customs duties and insurance coverage.

CIF is also useful for determining the value of the goods for customs purposes. In addition, CIF can help to reduce the risk of loss or damage to the goods during transportation. The seller is responsible for ensuring that the goods are properly packaged and loaded onto the ship. The buyer is responsible for ensuring that the goods are cleared through customs and delivered to their final destination. Overall, CIF is an important logistic term that helps to facilitate international trade by providing a clear understanding of the costs and responsibilities involved in shipping goods.

EXW Incoterm (Ex Works) – Use and Meaning

CIF, or Cost, Insurance, and Freight, is one of the 11 Incoterms defined by the International Chamber of Commerce (ICC). CIF helps make international trade easier by clearly stating who pays for shipping costs and basic insurance. CIF ensures that goods have basic insurance during their journey, solving issues related to cost and risk allocation in shipping. Cost, Insurance, and Freight (CIF) is an international shipping agreement used when freight is shipped via sea or waterway. Under CIF, the seller is responsible for covering the costs, insurance, and freight of the buyer’s shipment while in transit.

As an example, let’s say Best Buy has ordered 1,000 flat-screen televisions from Sony using a CIF agreement to Kobe, a Japanese port city. Sony has delivered the order to Kobe and loaded it onto the ship for transport. Once loading has been completed, the risk of loss is transferred from Sony to Best Buy. In return, Sony has purchased insurance and pays the freight and shipping costs until the ordered goods reach the buyer’s port of destination. Deliver happens in the port of loading, the risk for seller ends at the port of discharge and must acquire insurance coverage.

✔ If the seller has better freight rates than the buyer.✔ When buyers want a fixed total cost, including transport and insurance.✔ If the buyer lacks experience in handling international shipments. Although the CIF shipping term establishes that the seller must purchase insurance, the risk of the goods transfers from the seller to the buyer when they are loaded on the vessel at the port of origin. Until the goods are loaded on the vessel, the seller is liable for any loss or damages. Both the above are two different forms of international shipping agreements where the cost sharing and the rules and responsibilities of both buyer and seller of goods are defined. In simple words, it is an expense incurred by the supplier for covering all the costs, such as freight and insurance against the loss of goods due to damage, theft, etc., to a purchaser’s order when the goods are in transit.

Understanding them is essential for companies to successfully navigate transnational shipping agreements effectively, minimising risks and clarifying costs and responsibilities. To this end, we have written a comprehensive guide on the CIF Incoterms, offering insights into their application and benefits for global commerce. CIF and CIP are both Incoterms that require the seller to arrange and pay for insurance, but they are used in different contexts and have key differences.

In this guide, we will try to explain the CIF term and clarify the scope of responsibilities for each party – the buyer and the seller. This allocation can influence the total landed cost of your goods and affect your supply chain budgeting. This guide covers company types, formation steps, tax registration, and EEA director or bond requirements for U.S. founders.

It’s specifically beneficial for those who want to make transportation as simple as possible. Hence, from this point, the buyer is responsible for the organization, insurance, and any other charges that occur, including import duties. In short, FOB provides the buyer with much more flexibility when it comes to choosing a freight carrier and discussing rates. When it comes down to international trade, both CIF and (Free on Board) FOB are two of the most frequently used and, of course, compared terms. They are both recognized under the Intercoms 2020, and they lay out a clear set of rules on cost, insurance, risk, and responsibility.