CIF or Cost, insurance, and freight is an international shipping deal in which the charges paid by the seller for cost, insurance, and freight of their order are presented while the order is in transportation. The Cost, insurance, and freight or (CIF) as it is called are only applicable to the goods which travel through waterways, sea, or an ocean.
The contract term of CIF when defined precisely is when the liability of the seller ends and the liability of the buyer begins, which is the primary function of CIF.
Understanding CIF meaning
CIF marks the end of the liability of the seller and the beginning of the liability of the buyer. In this case, it’s an agreement between buyer and seller during the shipment of cargo related to its safety.
The seller has the responsibility for paying the cost and freight of shipping the goods to the buyer’s destination port. Generally, a seller who has direct access to ships will likely use CIF.
As an agreement CIF has some terms and conditions for both buyer and the seller. It refers to the responsibilities of both parties by which the contract is held or else deemed null and void. From CIF meaning, we understand that CIF charges are inevitable and both parties have to understand their responsibilities and carry out those.
Responsibilities of different parties under CIF
Here is a list of responsibilities as per the agreement which has to be followed by both parties:
● Seller Responsibilities
Sellers responsibilities include the following:
- Purchasing an export license for the product.
- Providing inspections of the product.
- Charges of shipping and loading the goods from the seller’s port.
- Cost of shipping the freight via sea or waterway from the seller’s port to buyers port of destination.
- Covering the cost of any damage or destruction of goods.
- Cost of insuring the goods until they reach buyers’ destination port.
- And lastly fees of custom clearance, duty, and taxes.
The seller must ensure the delivery of goods to the ship within the agreed-upon time and also provide proof of delivery and loading.
● Buyers’ Responsibilities
Once the goods arrive at the buyer’s port the buyer takes the responsibility of importing and delivering the goods. some of these costs include:
- Unloading the product at the port terminal.
- Transferring the product within the port terminal and to the delivery site.
- Custom duty charges and associated with importing the goods.
- Charges of transporting, unloading, and delivering the goods to the final destination.
As per the CIF meaning, these responsibilities should be fulfilled by both parties alike for the completion of the shipping process.
What is the transfer risk?
When shipping internationally there can be different risks and cost transfer points between the buyer and seller, depending on the type of shipping agreement. Under CIF meaning, the risk transfer is at different points than cost transfer. The exact details of the contract will determine the liability for the goods transfers from the seller to the buyer.
What are the special considerations?
Since the buyer assumes the risk when the goods are loaded on the vessel, in certain situations, may not be suitable for a CIF agreement. From CIF meaning, you must understand that there would be exceptional instances where these agreements are not applicable. For instance, with container-type goods, the goods may sit in the container for days before loading on the seller’s port. Under CIF meaning, the buyer would be at risk if such a situation happens and goods sit on the seller’s dock waiting to be loaded on the vessel. As a result CIF agreements would not be applied in such situations.
As an exporter who wishes to undertake shipping services, you must understand that CIF is applicable only on sea shipments. Click here to know more about CIF charges you might incur as this is the most common when you book a container.