International Business

What Does Cost Insurance And Freight Mean

Cost Insurance and Freight (CIF) means that the seller delivers when the goods pass the ship’s rail in the port of shipment. The seller has to pay the costs and freight necessary to bring the goods to the named port of destination. But the risk of loss of or damageĀ  to the goods, as well as any additional costs due to events occurring after the time of delivery, are transferred from the seller to the buyer. However, in CIF (Cost Insurance and Freight) the seller also has to procure marine insurance against the buyer’s risk of loss of or damage to the goods during the carriage (Incoterms 2017).

The price quoted under this CIF (Cost Insurance and Freight) contract includes cost of goods, freight charges up to named destination and insurance covering the voyage. In other words, all expenses incurred up to the port of destination are borne by the seller. Unless otherwise specified in the contract, insurance for 110% of contract price with minimum cover of the Institute Cargo clauses shall be obtained.

 

In other respects, the duties of the seller and buyer are similar to that under CFR contract. Similarly, the risk in the goods passes on to the buyer the moment they are placed on hoard a vessel in the seller’s country.

Documents to be furnished underĀ CIF (Cost Insurance and Freight) contract are:

(a) Freight paid bill of lading,

(b) Insurance policy,

(c) invoice, and

(d) Other documents as required by the buyer.

Variants of CIF Contracts: There are two variants of CIF & C contract in use. They are, however, not recognized under Incoterms 2000:

1. Cost, Insurance, Freight and Commission (CIF & C). This is similar to CIF contract except that the price includes in addition commission payable to agents for the contract.

Documents required in Cost, Insurance, Freight and Commission (CIF & C):

(a) Freight paid bill of lading

(b) Insurance policy

(c) Statement of commission paid

(d) Invoice, and

(c) Other documents as required by the buyer

2. Cost, Insurance, Freight- Commission and Interest (CIFC & I). In addition to the price under CIF contract, this includes commission payable to the agents and interest of the transactions.

Documents required in CIFC & I:

(a) Freight paid bill of lading

(b) Insurance policy

(c) Statement of commission paid

(d) Invoice, with details of interest, and

(e) Other documents as required by the buyer

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