what is cost insurance and freight cif 
cost insurance and freight cif is an international shipping agreement which represents the charges paid by a seller to cover the costs insurance and freight of a buyer s order while the cargo is in transit cost insurance and freight only applies to goods transported via a waterway sea or ocean the goods are exported to the buyer s port named in the sales contract once the goods are loaded onto the vessel the risk of loss or damage is transferred from the seller to the buyer however insuring the cargo and paying for freight remains the seller s responsibility 1cif is similar to carriage and insurance paid to cip but cif is used for only sea and waterway shipments while cip can be used for any mode of transport such as by truck understanding cost insurance and freight cif the contract terms of cif define when the liability of the seller ends and the liability of the buyer begins cif is only used when shipping goods overseas or via a waterway the seller has the responsibility for paying the cost and freight of shipping the goods to the buyer s port of destination usually exporters who have direct access to ships will use cif however the buyer has responsibilities as well which are outlined below under cif terms the seller s responsibilities include the seller must deliver the goods to the ship within the agreed upon timeframe and provide proof of delivery and loading once the goods have arrived at the buyer s destination port the buyer assumes responsibility for the costs associated with importing and delivering the goods some of these costs include the following it s important to note that when shipping internationally there can be different risk and cost transfer points between the buyer and seller depending on the type of shipping agreement under cif the risk transfer is at a different point than the cost transfer the exact details of the contract will determine when the liability for the goods transfers from seller to buyer since the seller pays the shipping freight and insurance costs until the cargo arrives at the buyer s destination port the cost transfer occurs when the goods have arrived at the buyer s port however the risk transfer occurs from the seller to the buyer when the goods have been loaded on the vessel although the seller must purchase insurance the buyer has ownership of the goods once loaded onto the ship and if the goods have been damaged during transit the buyer must file a claim with the seller s insurance company 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 would not be insured while they sit in the container waiting to be loaded on the vessel as a result cif agreements would not be appropriate for shipments including containerized cargo cif is different from cost and freight provision cfr whereby sellers are not required to insure goods in transit the icc and cost insurance and freight cif cif is one of the international commerce terms known as incoterms incoterms are common trade rules developed by the international chamber of commerce icc in 1936 2 the icc established these terms to govern the shipping policies and responsibilities of buyers and sellers who engage in international trade incoterms are often similar to domestic terms such as the u s uniform commercial code but with international applications for example the parties to a contract must state the locale of the governing law for their terms the icc limits the use of cif when transporting goods to only those that move via inland waterways or by sea the icc s official definition of cif reads over the years the international chamber of commerce 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 incoterms 2020 also made changes to the insurance coverage requirements under cif agreements sellers are now required to obtain a higher level or more comprehensive insurance than what was required under incoterms 2010 45there are seven incoterms 2020 rules for any type of transport and four incoterms rules for sea and inland waterway transports 6cif vs free on board fob cost insurance and freight cif and free on board fob are both international shipping agreements but have distinct differences between them each type of contract will cover different circumstances and much depend on your experience with international trade cif is an international agreement between a buyer and seller in which the seller has responsibility for the cost insurance and freight of a sea or waterway shipment although the possession of the shipment transfers to the buyer once the goods have been loaded on the boat or ship the seller is responsible for any shipping insurance and freight charges as a result the seller is responsible for the costs of moving the shipment until the goods have arrived at the buyer s destination port some of these costs include fees for shipping export customs clearance duty and taxes once the goods have been delivered to the buyer s destination port the buyer must pay the agreed price for the goods and is responsible for any import fees taxes or custom duty charges also any transportation inspection and licensing costs as well as the cost to transport the goods to their final location are the buyer s responsibility free on board means the seller has the responsibility for delivering and loading the product onto the ship including any costs associated with that process however the responsibilities transfer to the buyer once the goods have been loaded onto the ship the seller has the following responsibilities under fob under fob the buyer has the following responsibilities it s important to note that there are different types of fob agreements and the insurance coverage can be negotiated between the buyer and seller in other words there could be an agreement in which the buyer pays the freight charges or cost of delivery but the seller might agree to pay for the marine insurance cif and fob are helpful since these shipping agreements outline whether the buyer or seller has the responsibility for the freight during the shipment these terms are important since they indicate which parties are responsible for insurance freight charges and which party is held responsible in the event the goods are damaged during transport example of cost insurance and freight cif as an example let s say that best buy has ordered 1 000 flat screen televisions from sony using a cif agreement to kobe a japanese port sony has delivered the order to the port and loaded the product 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 while the ship is en route a fire breaks out in one of the cargo bays the cargo is damaged due to the fire and the water during fire fighting efforts since a cif agreement was in place best buy can file an insurance claim to cover the cost of the damaged goods 