CIF (Cost, Insurance and Freight)
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.
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In practice
Two points, not one
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.
Why a CIF price can look higher
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.
Checking the insurance cover
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.
Sea transport only
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.
Related terms
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.
Sources
- Know Your Incoterms. International Trade Administration, U.S. Department of Commerce (accessed )
- Customs valuation: Incoterms. HM Revenue & Customs (GOV.UK) (accessed )
- Guidance Note: Using the Incoterms® 2020 Rules to Manage Tariff Risk in International Trade. International Chamber of Commerce (ICC) (accessed )
- Guide to import goods. European Commission, Access2Markets (accessed )
- The Incoterms® rules 2010 (introduction). International Chamber of Commerce (ICC) (accessed )
- Incoterms® 2020. International Chamber of Commerce (ICC) (accessed )
Reviewed by Naim Islam
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