AIT’s global team of experienced transportation management is well-versed in the Incoterms rules and all shipping terms. ✔ Choose a reliable freight carrier and insurer.✔ Ensure the insurance policy covers potential risks.✔ Communicate with the buyer about shipping schedules and tracking details. Since the seller is responsible for arranging the freight and insurance, the buyer often finds these terms much more convenient and practical. If you’ve landed on this term in a contract—or you’re shipping goods internationally and someone just tossed “CIF” into the conversation—you need a clear breakdown of what you’re signing up for. This guide covers what CIF means, who handles which part of the shipping journey, and when it makes sense to use this Incoterm. Depending on the specific needs of the transaction, sellers and buyers may choose different terms that better suit their requirements.

The Many Facets of CIF-Driven Trade

• The risk remains with the seller until the goods are delivered to the buyer’s premises.
• Under CIF terms, the Brazilian supplier is responsible for covering the costs, insurance, and freight needed to get the coffee beans safely to Genoa.
• It is crucial for both parties to maintain clear documentation and proof of delivery.
• It’s 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.
• The disadvantages of using CIF for buyers include limited control over shipping and insurance arrangements, as these are managed by the seller.

When it comes to international shipping and trade, understanding the terms and responsibilities involved is essential. One of the most commonly used terms in global trade is Cost Insurance and Freight (CIF). Whether you’re new to importing or exporting, or a seasoned professional, knowing exactly what CIF means, its costs, and implications can save you time, money, and headaches. If you are involved in cross-border trade, you will undoubtedly understand the importance of selecting the right international shipping agreement.

CIF vs. FOB (Free on Board)

Under CIF Incoterms, these roles are clearly defined to avoid any ambiguity. Imagine a company in Italy purchasing coffee beans from a supplier in Brazil. They agree on CIF Incoterms for the shipment of 10 tons of coffee beans to the Port of Genoa, Italy. CIF is different from Cost and Freight (CFR), whereby sellers aren’t required to insure goods in transit. Under the CIF (Cost, Insurance, and Freight) Incoterm, there are clear roles for both the seller and buyer.

Drayage Meaning in Logistics (2025 Guide): Definition, Types & Importance

The buyer assumes all risk once the goods are on board the vessel for the main carriage; however, they don’t take on any costs until the freight arrives at the named port of destination. ❌ If the buyer wants full control over freight and insurance.❌ When shipping high-value goods, as CIF only includes minimum insurance.❌ If the buyer has access to better shipping rates. The contract terms of Cost, Insurance and Freight will define when the liability of the seller ends and that of the buyer begins. It is similar to Free on Board (FOB) shipping with the primary difference being who is responsible for bearing the expenses up to the point of loading the product onto the transport vessel. However risk transfers from seller to buyer once the goods have been loaded on board, i.e. before the main carriage takes place.

CIF Vs FOB

Discount does not apply to Volume, Custom Quotes, FTL, nor Parcel shipments. In this quick article, we’ll unwrap the CIF meaning in freight terminology, showcase, and discuss whether it differs from other arrangements, cost insurance and freight meaning such as FOB. In addition, we’ll go over some of the pros and cons of those arrangements, sharpening your knowledge with clear and practical data. So while it feels like the seller is covering everything, the buyer assumes the risk before the goods even leave the dock.

CIF means that the seller is responsible for the costs of transporting the cargo and obtaining insurance to protect the buyer from any damages to the goods during transport. However, the buyer assumes responsibility for the goods once the cargo has reached the buyer’s port. However, the seller must still pay for freight and secure minimum insurance coverage for the cargo during its journey.

When Should CIF Be Used?

Let us study the various advantages of the concept of cost insurance and freight contract in detail. The seller must deliver the goods aboard the ship within the agreed-upon time frame. They must also give the buyer sufficient notice of delivery and provide proof of delivery and loading. Buyers should be aware of the customs duties and import regulations of the destination country. These can vary significantly and impact the overall cost of the transaction. Destination PortCIF is used when goods are shipped to a specific destination port, whereas FOB is used when goods are shipped from a specific port of origin.

Further Reading: What are Incoterms

This control can help in managing the shipping schedule and ensuring that the goods are insured adequately during transit. While the ship is en route, a fire breaks out in one of the cargo bays, damaging the product. Since a CIF agreement was in place, Best Buy can file an insurance claim to cover the cost of the damaged goods. Contrasting the CIF, in a FOB agreement, the buyer assumes a bit more responsibility than the seller.

• The seller must deliver the goods aboard the ship within the agreed-upon time frame.
• CIF and EXW represent opposite ends of the spectrum in terms of seller and buyer responsibilities.
• Cost, insurance and freight (CIF) is a shipping agreement that applies exclusively to goods transported by sea or waterway.
• Seller’s Delivery RequirementThe seller takes care of the delivery by loading the goods onto the vessel at the port of shipment, on an agreed date or within an agreed period.
• Cost, Insurance, and Freight is a common Incoterm for buyers that do not have a lot of experience in international trade.

✔ Consider buying additional insurance for better protection.✔ Verify that the insurance coverage meets your needs.✔ Be prepared for customs clearance and inland transport. Under the CIF freight terms, here, the seller is responsible for the transportation arrangement, costs, and securing the safety and insurance until the goods are loaded. This generally means that the goods are loaded on the vessel by the seller, who also arranges the transportation and pays up front for the marine insurance. Hence, from that point onwards, the buyer assumes the risk, even though the seller still pays for everything.

The buyer only arranges for offloading and transportation to the end destination. The largest part of the costs are controlled by the seller, so there is a risk of overcharging. The seller may also select options for transportation that are more costly than the buyer would have. Because risk is transferred to the buyer once the shipment is loaded, the risk is relatively low. Until the shipment is loaded, the seller is responsible for any loss or damage.

Instead, use FCA (Free Carrier), CPT (Carriage Paid To), and CIP (Carriage and Insurance Paid To), which are the correct alternatives as they are meant for containerised freight. Landed cost is the total cost of getting goods from the seller to the buyer’s location, including all expenses up to the destination port. Under CIF (Cost, Insurance, and Freight) terms, this includes the price of the goods, freight charges, insurance, and any other costs incurred during transit. To calculate the landed cost, simply add the CIF price to any additional expenses such as import duties, taxes, and handling fees at the destination port. 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.