CIF: price with delivery and insurance
The CIF delivery term, or Cost, Insurance and Freight, is a sea basis: the seller pays for carriage and cargo insurance to the named port of destination, as well as delivery to the port of shipment, export clearance and loading on board.
Risk, however, passes to the buyer at the moment of loading on board, not at the port of destination. That is, the seller's costs end at the port of destination, while his responsibility for the cargo ends at the port of shipment.
What the abbreviation means
The name of the term breaks down into three components: the cost of the goods, insurance and freight. The key word here is insurance: it is what distinguishes CIF from CFR, where the seller pays only for carriage.
CIF applies to sea and inland waterway carriage. It is not suitable for a truck, a railway or aviation: those use CPT and CIP. This matters because replacing a sea term with a "universal" one without changing the meaning is impossible — both the point of transfer and the composition of costs change.
Obligations of the parties under CIF.
| Stage of delivery | Seller | Buyer |
|---|---|---|
| Packing and marking | Yes | No |
| Delivery to the port of shipment | Yes | No |
| Export clearance | Yes | No |
| Loading on board the vessel | Yes | No |
| Freight to the port of destination | Yes | No |
| Cargo insurance | Yes | No |
| Import clearance | No | Yes |
| Unloading at the port of destination | No | Yes |
The term must always name the port of destination. "CIF" without a port does not describe a delivery: the parties will not understand up to what point the seller pays for the route.
What is included in the price
The CIF price includes the goods, delivery to the port of shipment, export clearance, loading on board, freight to the port of destination and cargo insurance. Everything that happens after the vessel arrives is on the buyer: unloading, import procedures, delivery to the warehouse.
| Component | FOB | CFR | CIF |
|---|---|---|---|
| Goods | Seller | Seller | Seller |
| Delivery to the port, export, loading | Seller | Seller | Seller |
| Freight to the port of destination | Buyer | Seller | Seller |
| Cargo insurance | Buyer | Buyer | Seller |
| Risk from the moment of loading | Buyer | Buyer | Buyer |
| Import and unloading | Buyer | Buyer | Buyer |
The main point is visible from the table: CIF and FOB differ only in the allocation of costs, while the moment risk passes is the same for both. A buyer who chooses CIF for the sake of "safety" gets a broader price, but not a later transfer of risk.
A practical conclusion for comparing offers: a CIF price cannot be compared with an FOB price directly. To compare the options, bring them to a single basis — either deduct the cost of freight and insurance from the CIF price, or add those costs to the FOB price. Otherwise the cheaper offer turns out to be simply narrower in composition.
Insurance
Under CIF the seller arranges the insurance. The cover is basic: it closes standard carriage risks, but not every damage and not any loss. The buyer has the right to demand extended cover — then it is agreed separately and accounted for separately in the price.
It matters that insurance does not shift the point at which risk passes. Under CIF risk passes on loading on board. If the cargo is damaged in transit, the buyer turns to the insurer and the carrier, not to the seller. The seller for his part must hand over the documents, including the insurance ones, so that the buyer can file a claim.
Who the beneficiary is — is also a matter of the contract. By default the insurance cover is arranged in the interests of the buyer, but the parties fix the specific wording in the contract. If this point is not agreed, in the event of a loss you may end up with a policy under which there is no one to pay.
Differences from FOB
The main difference between CIF and FOB is who pays for freight and insurance. Under FOB it is the buyer, under CIF the seller. The moment risk passes coincides: in both cases it occurs on loading on board the vessel.
Then the conveniences diverge. CIF is convenient when the buyer needs a single figure "to the port" and does not want to deal with freight separately: the seller takes on carriage and insurance. FOB is convenient when the buyer has his own carrier, his own schedule and the ability to influence the freight rate directly.
| Question | FOB | CIF |
|---|---|---|
| Who pays the freight | Buyer | Seller |
| Who insures | Buyer | Seller |
| When risk passes | On loading on board | On loading on board |
| Who to claim from in transit | Buyer | Buyer |
| What is visible in the price | Goods and delivery to the port | Goods, delivery, freight, insurance |
If the transport is not by sea, focus on CIP: it repeats the logic of CIF for any mode of transport. The difference between them is the level of insurance cover: with CIP it is usually broader than the basic CIF cover.
The basis in an order on the exchange is set before the trade and is transferred into the trade without renegotiation. So write it in full: "CIF, Incoterms 2020, port of destination". Remember that an order lives in one market — one commodity, one currency, one unit of quantity — and the delivery points of counter orders must overlap.
Frequently asked questions
What are CIF delivery terms
This is a sea delivery basis under which the seller pays for carriage and cargo insurance to the port of destination, as well as delivery to the port of shipment, export and loading on board. Risk passes to the buyer at the moment of loading on board.
What is included in the CIF price
The goods, delivery to the port of shipment, export clearance, loading on board, freight to the port of destination and cargo insurance. Unloading, import clearance and delivery to the buyer's warehouse are not included in the price.
Who insures the cargo under CIF
The seller arranges insurance on basic terms. The buyer may demand broader cover — that is a separate agreement. Insurance does not change the point at which risk passes: it remains at the moment of loading on board.
Where risk passes under CIF
On loading on board the vessel at the port of shipment. The seller's costs, however, go further — to the port of destination. Because of this discrepancy it is important for the buyer to understand that he files a claim for damage to the cargo in transit with the carrier and the insurer.
How CIF differs from FOB
In the composition of the price: under CIF the seller pays freight and insurance, under FOB the buyer does. The moment risk passes is the same for both terms — loading on board. Prices on different bases cannot be compared directly.
How CIF differs from CIP
In the mode of transport and the level of insurance cover. CIF applies to sea and inland waterway carriage, CIP to any mode of transport. With CIP the cover is usually broader, and risk passes on delivery to the first carrier, not on loading on board.
Can CIF be used for road transport
No. CIF describes sea carriage and loading on board. For road, rail and aviation, CPT or CIP is used, and costs are allocated by the same logic.
Who pays for unloading at the port of destination
The buyer. Under CIF the seller's obligations end with freight to the port of destination and insurance; unloading, import procedures and delivery to the warehouse are the buyer's area.
What to do next
- Incoterms 2020: delivery bases in plain words — all 11 terms and the rules for choosing.
- FOB: what it means and where the seller's responsibility ends — a basis with the same transfer of risk.
- FCA, CPT, CIP: transitional delivery terms — universal terms for any transport.
- How the exchange works — how the basis is fixed in an order before the trade.
- Open an account — registration is free, state the basis and port of destination in your order.