Cost, Insurance, and Freight (CIF) (Incoterm)
Cost, Insurance, and Freight (CIF) is an Incoterm where the seller is responsible for arranging and paying for the cost of goods, marine insurance, and ocean freight up to the named destination port. The seller must secure insurance that covers the buyer during transit, providing financial protection if damage or loss occurs at sea. CIF gives buyers convenience because major shipping arrangements are handled by the seller. It also gives clarity on the total landed cost up to the destination port.
Under CIF, the risk transfers from seller to buyer the moment the goods are loaded on board the vessel at the origin port. Even though the seller pays for freight and insurance, the buyer assumes risk once the cargo crosses the ship’s rail. This separation between cost responsibility and risk responsibility is a key feature of CIF. It requires both parties to understand exactly when risk passes and who manages each stage of transport.
CIF applies only to sea and inland waterway transport and is commonly used for bulk cargo, commodity shipments, and containerized freight. It helps buyers who prefer not to manage freight booking but are comfortable taking risks once goods are loaded. Sellers, on the other hand, must carefully arrange insurance and documentation, including the commercial invoice, bill of lading, and insurance certificate. Proper documentation ensures smooth customs clearance for the buyer.
Overall, CIF provides a structured and predictable shipping arrangement where sellers handle major costs up front, while buyers take over the risk during the journey. It helps simplify procurement, especially in international trade, where handling freight at the origin may be challenging for the buyer. When used correctly, CIF promotes transparency, cost clarity, and efficient coordination between both parties.
Frequently Asked Questions about Cost, Insurance, and Freight (CIF) (Incoterm)
Clear answers to the most common questions people have when learning about Cost, Insurance, and Freight (CIF) (Incoterm).
Risk shifts to the buyer once the goods are loaded on board the vessel at the origin port, even though the seller pays for freight and insurance afterward.
The seller must obtain minimum marine insurance coverage for the buyer’s benefit, usually equivalent to Institute Cargo Clauses (C). Buyers may arrange extra insurance if needed.
No. CIF is used only for sea and inland waterway shipments. For multimodal or air shipments, Incoterms like CIP or FCA are more appropriate.