CIF | Cost, Insurance and Freight

CIF (named place) INCOTERMS 2020

CIF means the goods are delivered and the risk is transferred from the seller to the buyer when:

• The goods are placed onboard the ship,
• Which is nominated by the seller, 
• And the freight is paid up to the named place.

In this rule, the location at which the risk is transferred from the buyer to the seller and the location up to which the seller is responsible to arrange and pay for transportation costs are NOT the same. That means, once the goods are placed on the board the ship, it is assumed that the seller has done their responsibilities even if the goods are damaged on the way or do not arrive at the named place of destination at all. The seller is responsible to insure the goods, however, with minimum coverage.

What you really need to watch for:

• This rule is only used for ocean freight or shipment through international waterways.
• When there are more than one mode of shipment which is normally when the goods are handed over to the transport service provider at a container terminal, the right term to use is CIP and not CIF.
• There are 2 ports in this Incoterms rule. One is the origin port where the risk is transferred from the seller to the buyer by loading the goods on board the ship nominated by the seller, and the second port is the port of destination which is the named place up to where the seller has to pay the transportation costs. It is strongly recommended that the port at the origin where the risk is transferred from the seller to the buyer, is precisely mentioned. 
• Is it also recommended that the exact berth point at the port of destination is also clearly mentioned as this is the point up to where the seller has to pay the transportation cost.
• Where there are transshipment points in the shipping process, for example, the shipment is loaded at Hong Kong on a feeder vessel and goes to Shanghai and is transshipped to a ocean vessel to go to Hamburg, unless otherwise is agreed, it is assumed that the risk is transferred from the seller to the buyer at the first loading port which makes the duration of the risk course for the buyer. It is recommended that the parties get clear on this as well.
• If based on the transport contract between the seller and the shipping service provider, the seller undergoes discharge costs at the named place of destination, the seller cannot ask the buyer for it separately.
• The seller is responsible to insure the goos up to the named place of destination, however the seller is only obliged to provide insurance with minimum coverage like Clause C. If the buyer wants to have a higher quality coverage, they should either agree on it or the buyer needs to take action on their own.
• The seller is responsible to clear the goods for export from the country of origin, but the seller is not responsible to do anything on the transit of the goods through the countries the shipment moves through or import clearance of the goods in the country of destination.