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What is Cost, Insurance and Freight (CIF) Incoterm in shipping? Everything you need to know

Expanding a business beyond domestic borders presents both opportunities and challenges. Navigating global trade requires a clear understanding of shipping terms like Cost, Insurance, and Freight (CIF).

Cost, Insurance and Freight (CIF) Incoterms: A detailed guide

Imagine an Indian textile manufacturer looking to ship handcrafted fabrics to a buyer in Europe. The CIF Incoterm ensures that the seller covers transportation, insurance, and freight costs, reducing financial uncertainty for the buyer. This blog post explores the CIF Incoterm in detail so you can leverage it to streamline global transactions.

What is Cost, Insurance, and Freight (CIF) Incoterm?

Cost, Insurance, and Freight (CIF) is one of the 11 Incoterms established by the International Chamber of Commerce (ICC) to standardize international trade practices. Under CIF, the seller assumes responsibility for the cost of goods, insurance, and freight to deliver the products to a specified port of destination. Once the goods are loaded onto the shipping vessel, the risk transfers from the seller to the buyer. CIF is primarily used for sea or inland waterway transport, and is ideal for transactions where both parties want the seller to handle logistics and insurance.

Key features of CIF:

● Seller’s responsibility: Covers cost, insurance, and freight up to the destination port.

● Buyer’s responsibility: Assumes risks and costs after goods reach the port.

● Applicable transport mode: Exclusive to maritime and inland waterway transport.

CIF Incoterms 2020 rule: Major changes and updates

The Incoterms 2020 rules brought several updates to ensure clarity and alignment with modern trade practices.² While the core principles of CIF remain unchanged, some notable updates are as follows:

1. Insurance requirements

Incoterms 2020 mandates that sellers provide a minimum insurance coverage equivalent to Institute Cargo Clauses (C). However, the buyer and seller can agree to a higher level of insurance if needed. This insurance must cover at least 110% of the invoice value, ensuring adequate compensation in case of loss or damage.³

2. Clarification of costs

The rules now explicitly outline costs included in CIF such as the cost of carriage, insurance, and freight, reducing ambiguity for both parties.

3. Clarified risk transfer

Risk transfers from the seller to the buyer when the goods are loaded onto the vessel at the port of shipment, not when they arrive at the destination.

CIF shipping terms

CIF shipping terms outline the seller and buyer’s responsibilities during the transportation process. Here’s a breakdown of what each party is accountable for:

1. Seller’s responsibilities

● Cover the cost of transporting goods to the destination port.

● Arrange and pay for insurance.

● Handle export clearance and documentation.

● Deliver goods to the shipping vessel at the port of origin.

2. Buyer’s responsibilities

● Assume risk once goods are loaded onto the vessel.

● Handle import clearance and pay for customs duties.

● Cover transportation costs from the destination port to the final location.4

When to use CIF Incoterms?

CIF should be used when the seller has direct access to the vessel for loading, including for non-containerized goods. It is particularly suitable for long-distance maritime shipments where the seller is responsible for the costs and liabilities of transporting goods to the named port, loading them onboard, and clearing the export duties. However, CIF might not be ideal for expensive, urgent items or transactions where buyers prefer more control over the shipping procedure.

Advantages of CIF Incoterms

Some of the advantages of using CIF in international shipping are as follows:

1. Transparency and lower risk

CIF lowers the possibility of disagreements between buyers and sellers by clearly outlining costs and duties.

2. Insurance coverage

Under CIF, the seller is responsible for providing insurance coverage for the goods during transit. This protects the buyer in the event that the items are damaged or lost during transit.

3. Long-distance shipping

CIF is usually used when shipping goods over long distances by sea as it simplifies the logistics and planning involved in such journeys.

4. Fixed expenses

CIF allows buyers to accurately determine the cost of goods, which enables better financial planning.⁵

Documents required for shipping under CIF

Some key documents required for international shipping under agreements such as CIF are as follows:

● Bill of lading: Serves as proof of shipment and contract between the seller and carrier.

● Commercial invoice: Details the transaction, including the value of goods.

● Insurance certificate: Provides proof of marine insurance coverage.

● Packing list: Packing list specifies the contents of the shipment.

● Certificate of origin: Indicates the country where the goods were manufactured.

Example of Cost, Insurance and Freight Incoterm (CIF)

Let us consider an example to understand how CIF can be applied in international shipping. Imagine a furniture retailer in London orders 500 custom chairs from a manufacturer in Bangkok under a CIF agreement. The manufacturer arranges for the chairs to be shipped to the UK, covers the freight costs, and buys insurance for the shipment.

Once the chairs are loaded onto the ship, the risk shifts to the retailer. During the voyage, a storm damages some containers, including the one with the chairs. Since CIF covers insurance, the retailer can claim the cost of the damaged chairs.

CIF vs FOB: What’s the difference?

CIF and Free on Board (FOB) are two different types Incoterms. Some key differences between the two are as follows:

Aspect

Responsibility of goods

Risk transfer

Control over logistics

CIF Incoterm

Seller arranges and pays for freight and insurance during transport.

Seller is responsible until goods reach the destination port; buyer takes over after arrival, including customs clearance.

Seller controls logistics, including choice of carrier and insurance.

FOB Incoterm

Buyer covers freight and insurance; seller covers goods and loading onto the ship.

Seller responsible only until loading; buyer takes over all costs and risks thereafter.

Buyer controls logistics, choosing the carrier and insurance provider.over logistics

Conclusion

CIF is a crucial Incoterm that outlines the responsibilities and costs between buyers and sellers in international shipping. By defining clear obligations up to the destination port, CIF ensures smoother transactions and reduces risks for both parties involved. For assistance with international shipping and other key aspects of e-commerce exports, exporters can leverage the tools and services offered by e-commerce export programs like Amazon Global Selling.

Amazon Global Selling: Easy e-commerce exports and hassle-free shipping

If you are a business owner and you want to sell your products across the world, Amazon Global Selling enables you to list and sell ‘Made in India’ products on 18+ Amazon global marketplaces. As an e-commerce exports program, Amazon Global Selling provides support and guidance at every step of your exports journey – documents and licenses, logistics, payments, advertising, and more.

Registered sellers can choose to ship their products by themselves through Merchant Fulfilled Network (MFN) or they can opt for Fulfillment by Amazon (FBA) and outsource order fulfilment to Amazon including packing, storage, delivery, and returns. Amazon Global Selling simplifies the process of international shipping, helping businesses navigate customs and reach a vast audience.

Frequently Asked Questions

1. What is CIF payment?

CIF payment involves charges related to cost, insurance and freight that are paid by the seller to move goods to the destination port of the customer or importer.

2. Which is better: FOB or CIF?

The choice between FOB and CIF depends on factors like cost management and risk tolerance. FOB may offer more control over shipping costs, while CIF shifts responsibility and insurance costs to the seller, simplifying logistics for the buyer.

3. Is CIF good for the buyer?

CIF is good for buyers that are looking to avoid the hassle of paying costs for freight and insurance for moving the goods.

4. Who pays for CIF delivery?

The seller is expected to pay for freight and insurance of the goods till the point they reach the destination port.

5. What is the CIF value in shipping?

CIF value is the price paid to the exporter for goods when it reaches the destination port of the customer.

6. Does CIF include duty?

CIF includes duty charges that are involved in the process of moving goods to the destination port.

7. Does CIF include insurance?

Under CIF, the seller is responsible for paying for the buyer’s shipment’s freight, insurance, and fees during transit.

8. What does CIF destination mean?

The seller is responsible for the cost, insurance, and freight of the goods until they reach the agreed-upon destination, called the CIF destination.

Published on January 12, 2023.
Updated on April 17, 2025.

Sources:
1. https://www.maersk.com/logistics-explained/customs-and-compliance/2023/10/06/cost-insurance-freight#:~:text=What%20is%20CIF%20in%20shipping,the%20cargo%20is%20in%20transit.
2. https://iccwbo.org/business-solutions/incoterms-rules/incoterms-2020/
3. https://www.shippingsolutions.com/blog/incoterms-cif.
4. https://www.shiprocket.in/blog/cif-in-international-shipping/
5. https://dclcorp.com/blog/shipping/incoterms-cost-insurance-freight-cif/
6. https://cargox.io/content-hub/cif-incoterms-your-guide-to-cost-insurance-and-freight-2024
7. https://www.clarksons.com/glossary/what-is-the-difference-between-cif-and-fob/

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