Cost Insurance and Freight - Definition
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What is Cost, Insurance, and Freight (CIF)?
Cost, Insurance and Freight (CIF), also known as "port of destination", is a rule that makes the seller of a commodity pay for all costs and freight, including insurance against loss or damage. Once the goods are successfully loaded on the transport ship, all risk associated with the good is transferred to the buyer.
Terms of Cost, Insurance, and Freight
CIF Terms for the Seller. CIF requires the following from the seller:
- Insuring the goods under at least the minimum cover of the Institute Cargo Clauses of the Institute of London Underwriters or any other akin set of clauses, for 110% of their value. The policy should be in a similar currency as the contract.
- To acquire goods from the carrier or declare claims against an insurer, all necessary documents must be given to the buyer by the seller. As a minimum, the documents to be given to the buyer include: invoice, insurance policy and loading bill. All three documents are a representation of the cost, insurance and Freight.
- Once the documents have been handed over to the buyer, the seller's duties come to an end.
CIF Terms for the buyer
- The buyer must pay the price stated in the contract for the goods. The rule doesn't specify when or how the payment is to be made. These should be listed in the contract.
- Apart from the buyer taking responsibility of the goods after the seller has successfully loaded them on the transport ship, the buyer must also receive the goods from the carrier at the named destination port.
- The goods have been successfully delivered once they have been released from the seller's control, and not when they reach the named destination port.
- All risks of loss or damage to the goods is born by the buyer once the seller has delivered them.
The ICC and Cost, Insurance and Freight
Cost, Insurance and Freight is one of the International Commercial Terms' (Incoterm) predefined commercial terms issued by the International Chamber of Commerce (ICC).
- Cost, Insurance and Freight is one of the International Commercial Terms' (Incoterm) predefined commercial terms issued by the International Chamber of Commerce (ICC) in relation to international commercial law.
- In CIF, the seller of a good bears all costs associated with sending the goods, and all costs relating to damage or loss to the good while the goods are being loaded onto a transport ship.
- The buyer bears the risk of loss or damage to the goods from the agreed date or at the end of the agreed period if he doesn't inform the seller about the destination port or the point within that destination port, thereby, making the seller unable to deliver the goods.