What is CIF?
CIF stands for “Cost, Insurance, and Freight” and literally means that the seller, sender, or manufacturer of goods pays for the cost, insurance, and freight expenses.
In the shipment of goods, CIF is one of many terms of contract for the sale of goods. In CIF, what is emphasized is the insurance that’s supposed to be paid by the seller along with the cost of delivery of the said goods. On legal terms, actual delivery will start when the goods literally clears the ship’s rail at the shipment port and not on the destination port. This marks the end of the sender’s responsibility on the goods for shipment. After which, the insurance paid by the sender/seller himself will cover the goods.
CIF or Cost, Insurance, Freight is usually applied to shipments on land and on water. And as with many other shipments, CIF terms clearly indicate that it is a contract that does not actually guarantee that the shipped goods would arrive at their point of destination. But the CIF terms rather indicate that goods complied with the standards in terms of delivery and insurance.
When goods are purchased and to be transported on ships, it is important for purchasers to know if the shipment is under CIF terms. If the goods are under CIF contract, it simply means that the insurance and freight cost are already added up to the actual cost of goods for shipment. In contrast, CFR terms of contract refer to sellers having to pay for the goods cost and freight only. Another trade term related to CFRs and CIFs is FOB or Free On Board. This refers to shipment of goods wherein the seller or manufacturer takes responsibility of the cost and delivery risk in shipment after the goods are brought past the ship’s rail at the original port.
In the US shipping industry, domestic shipments have some protection from the law as carriers are deemed liable for goods that are lost or damaged. CIF, because of its insurance aspect, is more applicable to international shipping of goods.