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CIF - Cost, Insurance and Freight
Explore the importance of Incoterms in international trade and their impact on the European logistics market. Incoterms is an international standard on the rights and obligations of the buyer and seller in the international transportation of goods.
Incoterms, or International Commercial Terms, play a crucial role in defining the responsibilities and liabilities of buyers and sellers in global trade. In the European logistics market, understanding and correctly applying Incoterms is essential for seamless and cost-effective international transactions. These terms, including EXW, FOB, CIF and DAP, govern everything from the point of origin to the final destination of the goods. For example, EXW and FOB give buyers more control over the transportation process, while other terms imply that sellers take charge. Interestingly, CIF prices are often quoted initially, but there is flexibility to offer prices based on different terms. Neele-Vat, with its extensive experience in international logistics, recommends choosing EXW or FOB, allowing maximum control while using our expertise to manage transportation to your specified destination. We will elaborate on each Incoterm and offer valuable insights for navigating the European logistics landscape.
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The ICC Incoterms® rule Cost, Insurance and Freight (CIF) is essentially identical to Cost and Freight (CFR), with the additional obligation on the seller to also procure and pay for insurance for the buyer. Proper delivery under both CIF and CFR occurs once the goods are loaded aboard the ship at the port of shipment. One could say that CIF is a Free On Board rule, but with additional obligations for the seller, namely arranging and paying for the sea transport and providing the transport insurance.
CIF is a maritime delivery condition and is not suitable for container shipping.
Characteristics:
Delivery: the seller delivers the goods by loading them aboard the vessel.
Transport risk: the risk of damage to and loss of the goods passes to the buyer as soon as the seller has delivered the goods, that is, when the goods are loaded on board the vessel. Prior to this, the seller bears the risk.
Transportation costs: the cost of transportation to the agreed port of destination shall be borne by the seller. Thus, the seller enters into a transport contract for transportation to the destination port. When the goods are on the quay of the destination port, further transportation is at the buyer's expense.
Customs formalities: the seller must take care of the customs formalities arising from the export. For his account are also the related costs, duties and taxes. At the buyer's expense and risk are all customs formalities and related costs, duties and taxes arising from importation into the country of destination.
Transportation Insurance: the seller shall enter into an insurance contract on behalf of the buyer from the port of shipment to at least the port of destination. The insurance shall meet the requirements of the Institute Cargo Clauses (C).
Addition place of delivery: the delivery condition should always add where the transfer of the goods takes place. In CIF this is indicated by: ... agreed port of destination (... named port of destination). Note that with the C terms, delivery (and transfer of risk) already takes place on departure. Transport costs are for the seller up to the agreed port of destination.
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