In this article we will analyze what CIF terms include. Conclusion of a foreign trade contract between the buyer and the seller provides for an agreement that must include the basic terms of shipping – certain conditions that are spelled out in the set of international standards – the Incoterms. There are four categories of terms (C, D, E, F), each one offering basic terms. CIF terms belong to category C, it tells us that cargo insurance is mandatory and it is the seller’s responsibility to obtain it.
Shipping goods under CIF terms is carried out exclusively by sea transport, and they are used when concluding a trade contract between representatives of different countries. CIF is translated into Russian as “cost, insurance and freight”. CIF terms are a part of the international rules of Incoterms which were created to avoid misunderstanding between the buyer and the seller.
CIF price: what does it mean?
When planning sea freight, the question arises: what is CIF price and what does it include? Let's find out. The total cost of cargo includes the price of the goods, the expenses for packaging, labeling, delivery to the seaport, customs clearance, obtaining all necessary permits, certificates, licenses, documents, carrying out loading operations on board the ship, paying for transportation, and insuring goods during their freight. All of the above is the seller's responsibility. The buyer's obligations include acceptance of goods and their unloading, as well as customs import operations.
All risks associated with theft of goods or their damage, as well as any additional expenses, are transferred to the receiving party at the time of loading of goods onto the vessel at the terminal specified in the contract. CIF terms provide for the transportation of goods exclusively by sea. As a rule, using CIF for container transportation is not recommended. Under CIF terms the sender is allowed to provide insurance at the minimum rate.
The main differences between CIF, CFR and FOB
The abbreviation CFR is translated into Russian as “cost and freight” and has only one difference with CIF. Under CIF terms, mandatory insurance of products is to be provided by the seller. This option is the most profitable for the receiving party, since its products will be insured for the duration of shipping, and all responsibilities for obtaining insurance, paying insurance premiums becomes the responsibility of the sender.
FOB is literally translated from English into Russian as “free on board”. Like CIF, it only applies to shipping by sea, but it does not include payment for freight or insurance.
An agreement with a foreign partner must be understandable to both parties to the transaction. An MW-Trade specialist will provide more details about what CIF is and what terms would be more appropriate to choose for your particular contract. We carry out international sea shipping and we know all the subtleties of the terminology and the rules of Incoterms; we know what’s best for the client. Our company employs experienced logistics specialists, declarants, translators, lawyers. We have successfully delivered hundreds of tons of goods to different countries by various means of transport.
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