5 Essential Notes about: CIF Incoterms (Cost, Insurance & Freight)
CIF Incoterms means that the seller delivers the goods on board of the vessel. In addition to cost and freight to destination port, the seller must contract for the insurance. However, the risk of loss or damage during the carriage is for the buyer account.
It is highly recommended to read the post about CFR Incoterms on Shipup Blog in addition to current post.
1. Who is responsible for Contacting the carriage and Insurance in CIF Incoterms?
– The seller must contract for the carriage to the named place at destination. He also is obliged to contract for the insurance cover against the buyer risk of loss or damage during the carriage. The seller is required to obtain insurance only on minimum cover under CIF Incoterms.
2. What is the main difference between CFR and CIF Incoterms and which one is preferable?
– The only difference is the insurance. Under CIF term the seller is obliged to contract for the insurance against the goods.
– As all the risk transfers to the buyer once the goods are loaded, CIF is recommended.
3. Which type of insurance is mandatory in CIF Incoterms?
– The seller is only required to provide the insurance on minimum coverage. If the buyer expect more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.
4. How about the duration of insurance Under CIF Incoterms?
– The duration of the insurance cover must coincide with the carriage and must protect the buyer from the moment he has to bear the risk of loss of or damage to the goods (i.e., from the moment the goods are loaded on board at the port of shipment). It must extend until the goods arrive at the agreed port of destination.
5. How much is the amount of insurance in CIF Incoterms?
– The amount of the insurance should correspond to the price provided in the contract, plus 10 per cent.
To read the full obligation of the seller and the buyer in CIF Incoterms read the book “ICC Guide to Incoterms 2010”
Other useful links:
Free On Board (FOB) Incoterms
Free Carrier (FCA) Incoterms
Ex Works (EXW) Incoterms
CPT Incoterms (Carriage Paid To)
CIP Incoterms (Carriage and Insurance Paid To)
CFR Incoterms (Cost and Freight)
FAS Incoterms (Free Alongside Ship)
Incoterms: Shipping Guide Every Trader Must Know