INCOTERMS 2020 | CIF — COST INSURANCE FREIGHT

CIF, short for “Cost Insurance Freight”, means that the exporter is obligated to deliver the goods to the buyer by placing them aboard the vessel which it paid for and cover the insurance as well.

The exporter assumes all the risks and costs of loading to the collecting vehicle, inland transport, export clearance, THC, freight and insurance. From that point forward, all risks transfer to the importer.

It’s noteworthy that paying for the international transportation, which is in this case a vessel, doesn’t make the exporter bear the risks after loading the goods to the vessel until the destination port. The moment the exporter places the goods on board the ship, it has fulfilled its obligation to the importer; the rest is all the importer’s.

As for the unloading charges at the port of the importer’s country; if not agreed otherwise, it’s the importer that must assume the terminal handling charges (THC). Yet, it’s commonly carried out by the exporter. So, the parties must be clear about the THC at the named port of import mentioning it on the contract of sale.

As CIF is used for maritime shipping, if the buyer wants the goods to be delivered at its own warehouse, then the incoterm should be a D-group: DAP, DPU or DDP which are used for any mode of transport. If there will be more than one mode of transportation, the parties had better choose CIP.

Unlike CFR, the exporter is obligated to purchase insurance cover from the port of delivery to the port of destination. However the insurance doesn’t have to be Institute Cargo Clauses (A) as in CIP; unless otherwise agreed, the exporter will purchase insurance cover complying with the Institute Cargo Clauses ©.

Recap

The exporter purchases the insurance cover against buyer’s risk of loss of or damage to the goods, loads the goods to the vehicle, takes them to the port, carries out export clearance, places the container aboard the vessel which it has already paid for and it’s done. Additionally, If the unloading at the destination port is on the exporter according to the sales contract, then the exporter’s forwarder will handle it too; but remember that all the risks have transferred from the exporter to the importer when the goods are placed on the vessel in the exporter’s country.

Originally published at https://umitgumusten.com on June 6, 2021.