Definition
CIF (Cost, Insurance and Freight) is an Incoterms® 2020 rule for sea and inland waterway transport. The seller delivers the goods on board the vessel at the port of shipment, where the risk passes to the buyer, but the seller must also pay the freight to the named destination port and buy minimum insurance cover against the buyer's risk during the voyage.
Published 2 min read
CIF splits cost and risk at different places. The named place in the term is the destination port, written as "CIF" followed by the port name1, because that is how far the seller pays freight2. The risk, though, passes back in Bangladesh, when the goods are on board the ship2. If the goods are damaged on the voyage, the loss falls on you, and the insurance is what you claim against.
The seller also clears the goods for export in Bangladesh; you clear them for import and pay the duty at destination3.
A CIF price includes everything an FOB price does (transport to the port, loading, export clearance) plus the ocean freight and the insurance premium, so the seller's costs run until the goods arrive at the destination port4. A CIF quote will therefore look higher than an FOB quote for the same goods. To compare them fairly, price your own freight and insurance for the FOB offer, or use the method in the landed cost guide.
Look closely at charges at the arrival port. ICC's introduction to the 2010 rules warned that carriers or terminal operators may bill the buyer for handling costs the seller already included in its price, so the buyer pays twice5. Ask your forwarder which destination charges the seller's freight covers.
Under CIF, the seller only has to buy minimum cover. In Incoterms® 2020, the default for CIF is Institute Cargo Clauses (C), and the parties can agree a higher level6. HMRC gives the same advice to buyers: if you want more protection, agree it with the seller or arrange extra insurance yourself2. By contrast, CIP, a rule for any mode of transport, now requires cover in line with Institute Cargo Clauses (A) or similar6 3.
Before accepting a CIF quote, ask the supplier for the insurance certificate or policy details, the clauses that apply, the insured amount and currency, and who to contact to claim at your port.
CIF is one of the four Incoterms® rules for sea and inland waterway transport only3. For air freight, or goods handed to a carrier before loading, ask whether CIP is the better fit.
FOB (Free On Board): the same delivery point on board, but the buyer pays the freight and insurance.
EXW (Ex Works): the seller only makes the goods available at its premises.
Landed cost guide: how freight, insurance and duty add up.
Incoterms® is a trademark of the International Chamber of Commerce. This entry summarizes the rule in our own words and is not the official text.
Reviewed by Naim Islam
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FOB is an Incoterms® 2020 rule for sea shipments. The seller's job ends when the goods are on board the vessel at the named port; freight, insurance and import costs are the buyer's.
EXW puts the least on the seller and the most on the buyer. On an order from Bangladesh, that includes export clearance, which a buyer based abroad has to arrange through someone on the ground.
The smallest quantity a supplier will accept, how it is counted, and how it connects to quantity price tiers on Exportain listings.
The World Customs Organization's product classification code, where it appears in an order from Bangladesh, and why your duty depends on it.
