What is the meaning of CIF in shipping?
CIF – Cost insurance and Freight Definition of CIF (Cost insurance and Freight) Incoterms 2020 dictates that the CIF Incoterm, or “Cost, Insurance and Freight”, is exclusive to maritime shipping. Under CIF, the seller is responsible for the cost and freight of bringing the goods to the port of destination specified by the buyer.
What is Cost Insurance Freight (CIF)?
Updated Apr 30, 2020 What Is Cost, Insurance, and Freight (CIF)? Cost, insurance, and freight (CIF) is an expense paid by a seller to cover the costs, insurance, and freight of a buyer's order while it is in transit. The goods are exported to a port named in the sales contract.
What is the difference between CIP and CIF Incoterms?
CIF means cost, insurance, and freight, up to the port destination. CIP means carriage and insurance paid to the defined destination. For CIF, the seller needs to insure the cargo while aboard the ship. For CIP, they must insure the full transportation. Can CIF Incoterms be used for small parcel shipments? CIF can only be used for ocean shipments.
What is a cargo Incoterm (CIF)?
CIF is a Shipping Incoterm that stands for: Cost, Insurance, Freight agreement, with the seller holding responsibility for all three. When purchasing internationally, the seller is responsible for exporting the cargo and shipping it until they arrive at the destination port, while insuring the cargo throughout the voyage.
Can CIP be used for air freight?
Both CIF and CIP terms apply only to non-containerized cargo, like break bulk or project cargoes. CIF implies that the goods are transported oversea or inland waterway transport only, while CIP means that you can use any mode of transport including air freight, trucks, railways, etc.
Do Incoterms apply to air freight?
Note that while the Incoterms FAS, FOB, CFR and CIF are applicable to only sea or inland waterway transport, all other terms can be used for all modes of transportation—air, ground, rail and ocean. You'll find the named place required for each rule in the parentheses after the rule's name.
Can CFR be used for air freight?
CFR cannot be used analogously for air freight traffic, as it will not be possible for the seller to deliver the goods "on board" a ship. Alternatives for air transport would be CPT or FCA with the addition of "freight to be paid by the seller").
Can FOB terms be used for air freight?
FOB only applies to ocean or inland waterway transport. As such, the named place is always a port. It does not apply if the main carriage is via air, ground or rail. This term is commonly used for bulk cargo (such as oil or grain) or freight from Asia.
What is CIF air?
CIF stands for Cost, Insurance and Freight, a commercial rule under incoterms 2020 wherein the expenses are borne by the seller -- from delivering goods and bearing settlement charges for carriage and insurance till the designated port. CIF Incoterm cannot be used for air, rail and road transit.
Which Incoterm is best for air freight?
DDP Delivered Duty Paid Delivered Duty Paid is the Incoterm that places the heaviest burden on the seller. Delivery takes place anywhere at destination with the goods unloaded and cleared for import.
Is CFR and CIF same?
Cost and freight (CFR) is a trade term that requires the seller to transport goods by sea to a required port. Cost, insurance, and freight (CIF) is what a seller pays to cover the cost of shipping, as well as the insurance to protect against the potential damage of loss to a buyer's order.
Is CIF for sea freight only?
Use of this rule is restricted to goods transported by sea or inland waterway. In practice it should be used for situations where the seller has direct access to the vessel for loading, e.g. bulk cargos or non-containerised goods.
Which Incoterms are used for air?
And the 7 Incoterms for sea, land and air freight are:EXW.FCA.CIP.CPT.DDP.DAP.DPU.
What is CPT in air freight?
Key Takeaways. Carriage Paid To (CPT) is an international commercial term (Incoterm) denoting that the seller incurs the risks and costs associated with delivering goods to a carrier to an agreed-upon destination.
What is CFR by air?
Under CFR terms (short for “Cost and Freight”), the seller is required to clear the goods for export, deliver them onboard the ship at the port of departure, and pay for transport of the goods to the named port of destination.
Can FCA be used for air freight?
FCA can be used for any form of transport, such as air freight, sea freight, road freight, and rail freight. This Incoterm provides the buyer with flexibility, as they can arrange carriage, frequently at a better price than what their seller might quote.
Which Incoterms can be used for any mode of transportation?
EXW (Ex Works) EXW can be used for any mode of transportation.
What is CIF shipping?
What Is Cost, Insurance, and Freight (CIF)? Cost, insurance, and freight (CIF) is an international shipping agreement, which represents the charges paid by a seller to cover the costs, insurance, and freight of a buyer's order while the cargo is in transit. Cost, insurance, and freight only applies to goods transported via a waterway, sea, or ocean.
When is CIF used?
CIF is only used when shipping goods overseas or via a waterway. The seller has the responsibility for paying the cost and freight of shipping the goods to the buyer's port of destination. Usually, exporters who have direct access to ships will use CIF. However, the buyer has responsibilities as well, which are outlined below.
What are the responsibilities of a CIF seller?
Under CIF terms, the seller's responsibilities include: Any charges or fees for shipping and loading the goods to the seller's port. Fees for customs clearance, duty, and taxes (for exporting) Cost of shipping the freight via sea or waterway from the seller's port to the buyer's port of destination.
What is cost insurance and freight?
Cost, insurance, and freight only applies to goods transported via a waterway, sea, or ocean. The goods are exported to the buyer's port named in the sales contract. Until the goods are delivered to the buyer's destination port, the seller bears the costs of any loss or damage to the product. Further, if the product requires additional customs ...
What is transfer of risk in shipping?
It's important to note that when shipping internationally, there can be different risk and cost transfer points between the buyer and seller, depending on the type of shipping agreement. Under CIF, the risk transfer is at a different point than the cost transfer.
Can CIF be used for air freight?
CIF is only used when shipping goods via ocean or waterway, meaning CIF cannot be used for air freight. CIF can be easier for buyers who don't want to go through the trouble of obtaining insurance, paying freight charges, and assuming all of the responsibility for shipping internationally.
Who is responsible for insuring the risk of loss or damage during carriage?
The seller is also responsible for insuring to cover the risk of loss or damage during carriage. Further insurance beyond the required minimums must be agreed upon between the buying and selling parties or must be arranged for separately by the buyer. It is also important to note that the term applies only to sea and inland waterway transport." 1
How many incoterms are there for air freight?
Here Are the Incoterms You Can Use for Air Freight. The latest official publication by the International Chamber of Commerce (ICC) includes 11 Incoterms. Of those, four are meant for waterway transport only. The other seven can be used with any mode of transport, including air freight.
What is FCA free carrier?
FCA Free Carrier. Free Carrier is the only Incoterm whereby delivery can take place anywhere at origin. It can be a port, the seller’s premises, or an airport. Therefore, if you are shipping by airway, you can even set the place of delivery as the departure airport, or the seller’s premises, and then bring the goods with your own truck to ...
What is carriage paid to?
Carriage Paid To is a C-Group Incoterms rule, which entails all the idiosyncrasies of that group of Incoterms. The place of delivery must be at origin, but the seller must arrange for transportation up to the place of destination. This can be anywhere in the buyer’s country.
Can you ship goods to Munich?
Therefore, if you ship goods by airway to Munich, Germany, you will have to arrange for air transport up to Munich airport, pay import duties to German y, arrange for road transport in Germany up to the agreed place of delivery and place the goods at the buyer’s disposal unloaded off the truck.
Do you have to pay taxes at the airport when shipping DAP?
That means that if you ship under DAP by airway, the buyer must pay duties and taxes at the airport where the goods have arrived, even if you have to arrange for transportation.
Is CIP the same as CPT?
Carriage And Insurance Paid To is almost identical to CPT, with the difference that CIP requires the seller to provide for insurance for the goods. The insurance is set according to clause A of the Institute Cargo Clauses.
Can CIF be used for air freight?
Yet, this is totally wrong, as CIF is a maritime Incoterm and should not be used for air freight. If you are looking to ship goods by air, you should use one of the seven intermodal Incoterms.
What does CIF stand for in Shipping Terms?
CIF is a Shipping Incoterm that stands for: Cost, Insurance, Freight agreement, with the seller holding responsibility for all three. When purchasing internationally, the seller is responsible for exporting the cargo and shipping it until they arrive at the destination port, while insuring the cargo throughout the voyage.
Who is responsible for the loss of goods on a carriage vessel?
All risk is assumed once the goods are on board the carriage vessel. When an issue occurs during the shipping process, the buyer is responsible for rectifying or coping with the losses, not the seller.
What is a destination terminal charge?
Destination Terminal Charges: Also known as Destination Handling Charges, or DTHC, these are all costs associated with unloading to transferring the cargo within the terminal.
Is the buyer responsible for the destination handling charges?
The buyer is responsible for paying the destination handling charges, which is not a bad thing; however, it can create an added hidden cost to the buyer, unless discussed beforehand. There are times when shipping companies who are shipping for costumers under CIF terms will inflate the destination handling charges for the buyer because this is an unavoidable cost.
Does CIF include import duties?
No, it’s the buyer’s responsibility. CIF does not include any import duties, VAT, or taxes. It does include all export requirements. Under CIF, the seller must export and pay the costs to ship to your destination port, but you must import and pay all costs associated with the importation.
Who is responsible for insurance on a shipment?
Insurance: Under CIF Incoterms, the seller is responsible for obtaining insurance policy on the shipment, up until the port of destination.
Who pays import duties, taxes, and obligations?
All import duties, taxes, and obligations are the buyers. Because the seller is required to procure insurance, the cost of insurance and transportation is baked into the sale price. When a buyer imports under CIF Incoterms, they are not only paying customs duty and taxes on the product price, but also on the cost of freight and insurance.
What is CIF in shipping?
Revisions of CIF (Cost insurance and Freight) under Incoterms 2020. This rule too dates back to the early days of international shipping an is largely unchanged since then. The difference between CIF and CFR is that while the risk of loss or damage at delivery becomes the buyer’s, the seller is obliged to take out insurance for ...
What is CIF insurance?
CIF insurance. Under CIF, the seller is contractually obliged to provide insurance for the transport of the goods. Together with CIP, these are the only two Incoterms that stipulates that insurance must be provided by the seller. In common practice, the CFR Incoterm is often preferred by buyers if they are able to secure better cargo insurance ...
Why is CFR Incoterm preferred?
In common practice, the CFR Incoterm is often preferred by buyers if they are able to secure better cargo insurance coverages. This is because unlike CIF, insurance isn’t a seller’s obligation under CFR and can also be acquired by the buyer.
How to do FCA?
FCA Tips And Tricks 1 Refer to CPT, obviously excepting the tip on the buyer arranging insurance. 2 The seller need only arrange minimum insurance cover, to the invoice value of the goods. If the buyer considers that this level of cover is not sufficient, an agreed level of cover can be included elsewhere in the contract of sale. 3 Although the seller is responsible for insurance, the risk transfers to the buyer before the main carriage. 4 The seller is not obliged to arrange insurance for pre-carriage in the export country or carriage in the import country unless this is specified elsewhere in the sales contract.
What is CIF risk transfer?
CIF risk transfer takes place when the merchandise is loaded onto the shipping vessel and is recommended for situations in which the seller is able to access the vessel directly , such as in the case of bul k cargo shipping. This makes CIF unsuitable for containerized cargo.
What are the advantages and disadvantages of CIF?
Advantages and Disadvantages of CIF – Cost insurance and Freight. The advantage to the seller is that it can often obtain cheap insurance and then build a larger amount into its selling price. The advantage to the buyer is that it does not have to worry about declaring the shipment to its own insurer. The disadvantage to the buyer can be that the ...
What is the difference between a CIF and a FOB?
The major difference between FOB and CIF is when liability and ownership transfers. In most cases of FOB, liability and title possession shifts when the shipment leaves the point of origin. With CIF, responsibility transfers to the buyer when the goods reach the point of destination.#N#In most cases, we recommend FOB for buyers and CIF for sellers. FOB saves buyers money and provides control, but CIF helps sellers have a higher profit. However, we recommend that new buyers use CIF as they get accustomed to the importing process.
What is a CIF port of destination?
Named Place Requirement: Port of Destination. Applies to: Sea and inland waterway only. (Click to enlarge) Under CIF (short for “Cost, Insurance and Freight”), the seller delivers the goods, cleared for export, onboard the vessel at the port of shipment, pays for the transport of the goods to the port of destination, ...
Who assumes all risk once the goods are on board the vessel for the main carriage?
The buyer assumes all risk once the goods are on board the vessel for the main carriage; however, they don’t take on any costs until the freight arrives at the named port of destination.
Can you use CIP instead of insurance?
If the freight is containerized and delivered only to the terminal, use CIP instead. If using CIP instead, insurance coverage defaults to all-risk; however, the parties may negotiate a lower coverage requirement. The seller is obligated to secure insurance for the buyer, but only for minimum coverage.
How many incoterms are there for sea, land and air freight?
And the 7 Incoterms for sea, land and air freight are:
What is CFR in shipping?
The Incoterm CFR stands for Cost and Freight and is very similar to CIP (Cost, Insurance, Freight) except the seller does not have to source marine insurance. The buyer takes full responsibility for any costs and the risk of loss or damage once the goods are onboard the ship. This term is only applicable in sea or ocean shipping.
How many Incoterms are there?
This is the only glossary you need to get to terms with the 11 Incoterms outlined by the ICC. Each term is used in freight forwarding and defines the role of both the seller and the buyer when it comes to the transportation of goods.
What does FAS mean in shipping?
The Incoterm FAS stands for Free Alongside Ship and means the seller has delivered once the goods arrive at the named port of shipment. While it is the seller’s duty to clear the goods for export, the buyer takes all liability for costs and risks of damage or loss from that moment onwards. Like DES, this term is used in sea freight as opposed to air freight.
What is CPT in transportation?
The Incoterm CPT stands for Carriage Paid To and is very similar to CIP (Carriage and Insurance Paid) except the seller is not obligated to procure insurance. The seller must deliver the goods to the carrier and cover the costs of carriage to a named destination. The buyer takes over after the goods have been delivered. This term can be used in any mode of transport, including multimodal.
How long has John Pipe International been in business?
John Pipe International have over 60 years of experience dealing with export packing, freight and logistics management. Our dedicated account managers are always on hand to discuss your needs. Our team are on hand to assist you with export documentation and tell you exactly what the air freight Incoterms mean.
What is the ICC 2020?
In 2020, The International Chamber of Commerce (ICC) updated their world-renowned Incoterms to help businesses like yours manage global trade. They act as a set of rules that clearly outline the responsibilities of both the seller and the buyer when it comes to the transportation of goods.
What is FCA in trucking?
FCA (Free Carrier) FCA can be used for any mode of transportation. The seller is responsible for the goods from the seller’s location to the specified location or terminal. After the truck has arrived, the buyer assumes the responsibility of unloading the cargo, exporting, importing, and final delivery of the goods to the destination.
Who is responsible for transporting goods to the port of loading?
Under FAS terms, the seller is responsible for transporting the goods to the port of loading and clearing them for export at which point the buyer assumes all costs and risks thereafter (including loading the goods onto the vessel at the port of loading.)
What is CPT in transportation?
CPT can be used for any mode of transportation. CPT is similar to FCA, however, the seller must clear the goods for export and pay the carriage charges to get the freight to the terminal. It must also be noted that the seller is not responsible for insuring the goods to the named location.
Who is responsible for insuring goods and paying transportation costs to the named place?
The seller is responsible for insuring goods and paying transportation costs to the named place. Although very similar to CPT, the seller must insure the goods during carriage to the terminal or port of loading.
Is shipping internationally risky?
Shipping freight internationally can be expensive and risky. Everything from container rental and delivery to the cost of a container going overboard can quickly create a headache for importers and exporters if they assume all responsibility for the cost of their container from point A to point B.
Is understanding incoterms easy?
Understanding incoterms is no easy task. The above list is not comprehensive of all incoterms in existence, however, it gives a good glimpse into some of the most common ones. Many people don’t realize they are being robbed of cost savings and cargo control simply because of their shipping terms of agreement. Don’t waste your money and time. If understanding incoterms in more depth is in your interest, give us a call and we’d be happy to speak with you!
What Is Cost, Insurance, and Freight (CIF)?
Understanding Cost, Insurance, and Freight
The ICC and Cost, Insurance, and Freight
CIF vs. Free on Board
Example of Cost, Insurance, and Freight
CIF FAQs
- What Does CIF Mean in Shipping Terms?
Cost, insurance, and freight (CIF) is an international shipping agreement used when freight is shipped via sea or waterway. Under CIF, the seller is responsible for covering the costs, insurance, and freight of the buyer's shipment while in transit. The buyer is responsible for any costs once t… - Who Pays CIF Freight?
The seller must pay for the costs of transferring and shipping the freight as well as insuring the cargo until the goods have been delivered to the buyer's port.
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