CIF Incoterms 2020: Cost, Insurance and Freight
Under CIF the seller pays the ocean freight and minimum cargo insurance to the named destination port. Risk passes to the buyer once the goods are on board at origin.
CIF Cost, Insurance and Freight
Sea and inland waterway only
| Step | CIF |
|---|---|
| Export packing and marking | Seller |
| Loading at the seller's premises | Seller |
| Export customs clearance | Seller |
| Transport to the port or terminal | Seller |
| Terminal charges and loading at origin | SellerRisk passes to the buyer here |
| Main carriage (ocean or air freight) | Seller |
| Cargo insurance | Seller |
| Unloading at destination terminal | Buyer, unless in the freight contract |
| Transport to the named place | Buyer |
| Unloading at the named place | Buyer |
| Import clearance, duties and taxes | Buyer |
- CIF
- Risk passes: When the goods are on board the vessel at the port of shipment.
- Costs: The seller pays freight and minimum insurance (Institute Cargo Clauses C, 110% of value) to the named port of destination.
What does CIF mean?
CIF (Cost, Insurance and Freight) means the seller delivers the goods on board the vessel at the port of shipment, pays the freight to the named port of destination, and buys cargo insurance for the buyer's benefit. Risk passes to the buyer when the goods are on board at origin; the insurance protects the buyer during the voyage. CIF is a sea and inland waterway rule.
What insurance does CIF require?
The seller must buy at least the minimum cover of Institute Cargo Clauses (C), or similar, for 110% of the contract price, in the currency of the contract, and give the buyer the policy or certificate so the buyer can claim. Clauses C cover major events such as fire, sinking, stranding and general average, but not theft or most handling damage. The buyer can ask for wider cover (Clauses A, all risks) at its own cost. This is the main difference from CIP, which requires Clauses A by default since 2020.
Seller and buyer obligations under CIF
| Seller | Buyer |
|---|---|
| Books and pays sea freight to the named destination port | Bears the risk from on board at the port of shipment |
| Buys minimum insurance (Clauses C, 110%) and hands over the policy | Pays for extra cover if it wants it |
| Loads the goods and clears export | Pays unloading at destination, unless included in the freight contract |
| Provides the transport document and commercial invoice | Clears import and pays duties and taxes |
Example
A Brazilian coffee exporter sells "CIF Hamburg, Incoterms® 2020" at USD 200,000. The exporter books the ship from Santos, pays the freight and insures the cargo for USD 220,000 (110%). The coffee is wetted by seawater on the voyage. The risk was the buyer's from loading, so the buyer claims under the insurance certificate the exporter provided.
CIF value and customs duty
Many countries, including the EU member states and India, calculate import duty on a value that includes freight and insurance to the border, often called the CIF value. The United States generally does not include international freight and insurance. Your customs broker will confirm the basis, and you can add it all up as the landed cost.
CIF for containers
CIF is still widely quoted for container shipments, but the ICC recommends CIP for containers, because risk then passes when the container is handed to the carrier at the terminal. Note that CIP also needs higher insurance cover. Compare the two rules with the chart above, or use the Incoterms chooser.
Whatever the rule, the seller provides a commercial invoice that names the Incoterm and place, and usually a packing list. For quotes before the order, use a proforma invoice with the same rule written on it.
Features
- Who does each step under CIF
- Where risk passes, marked on the chart
- Compare CIF with CFR, CIP or any other rule
- Link to the Incoterms chooser
Frequently asked questions
What does CIF mean in shipping?
CIF means Cost, Insurance and Freight. The seller pays the sea freight and minimum cargo insurance to the named destination port. Risk passes to the buyer once the goods are on board at origin.
How much insurance is required under CIF?
At least Institute Cargo Clauses (C) or similar, for 110% of the contract price, in the contract currency. The buyer can ask for more cover at its own cost.
When does risk transfer under CIF?
When the goods are on board the ship at the port of shipment. The seller pays freight and insurance to destination, but the voyage is at the buyer's risk, which is why the insurance is in the buyer's favour.
What is the difference between CIF and CFR?
Insurance. Under CIF the seller must insure the cargo for the buyer; under CFR there is no insurance obligation.
What is the difference between CIF and CIP?
CIF is for sea and inland waterway only and needs minimum Clauses C cover. CIP works for any mode, passes risk when goods are handed to the first carrier, and needs all risks Clauses A cover.