Cost, Insurance, and Freight (CIF) Incoterms® explained

Incoterms® (or International Commercial Terms) are essential terms of international trade that define the rules and responsibilities of sellers and buyers. Understanding which Incoterms® rule to use for shipping your cargo is crucial to avoid unforeseen costs or unnecessary risks. Learn more about the meaning of Cost, Insurance, and Freight (CIF), when to use it – and when not to use it.

What is CIF in shipping?

Cost, Insurance, and Freight (CIF) is one of the 11 Incoterms® rules set by the International Chamber of Commerce. It’s 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. It follows the same procedure as the Cost and Freight (CFR) Incoterms® rule, but the seller must also provide insurance coverage in case of loss or damage to the goods during the transportation.

Once the goods have reached the buyer's port of destination, the buyer assumes costs and liabilities for unloading and delivering the shipment to the final destination.

CIF only applies to goods transported via sea or inland waterway.

When do you use CIF Incoterms® in shipping?

CIF should be used when the seller has direct access to the vessel for loading, including non-containerised goods. The seller assumes costs and liabilities for the transport to the named port, the loading onboard the vessel, and the clearing of the export. Similar to the Cost and Freight (CFR) Incoterms® rule, the risk transfers from seller to buyer once the goods have been loaded onboard; however, the seller also arranges and pays for insurance for the goods for transportation to the named port. The insurance should cover at least 110% of the value of the goods as provided in the sales contract and cover the goods to the point of delivery.

When should you NOT to use CIF Incoterms® in shipping?

Given that the risk transfers to the buyer once the goods are loaded onto the vessel, CIF (Cost, Insurance, and Freight) should not be used for containerised goods, since it can be difficult to tell exactly when damage has occurred to the goods inside a container. It is more suitable for bulk and breakbulk cargo. In fact, a common mistake with Incoterms® is to use a traditional “sea and inland waterway only” rule such as CIF for containerised goods, instead of the “all transport modes” rule. This can expose the seller to unnecessary risks. Instead, use FCA (Free Carrier), CPT (Carriage Paid To), and CIP (Carriage and Insurance Paid To), which are the correct alternatives as they are meant for containerised freight. CIF Incoterms® should not be used for air or land transportation either.

Incoterms® and the Incoterms® 2020 logo are trademarks of ICC. Use of these trademarks does not imply association with, approval of or sponsorship by ICC unless specifically stated above. The Incoterms® Rules are protected by copyright owned by ICC. Further information on the Incoterms® Rules may be obtained from the ICC website iccwbo.org.