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CIF is a term of international trade (known as Incoterm ) to refer to the cost, insurance and freight of maritime or river logistics that both the seller and the buyer of a commercial transaction must respect and negotiate. The Incoterm CIF is generally used for more valuable industrial products and to avoid the costs and documents of customs processes to the buyer. CIF is the Incoterm with the highest coverage in terms of cost, insurance and freight. The rights and obligations of these three aspects cover different stages of logistics and transport.

With the CIF, the seller agrees to cover the shipping, insurance and logistics and transportation documentation from the seller’s warehouses to the shipment of the merchandise to the ship at the port of origin.

Responsibility for the expenses and documentation of the vendor with the Incoterm CIF covers up the term of customs procedures at the port of destination. But mandatory seller insurance only covers until the products are shipped. Therefore it is not responsible if the ship sinks, for example. To reduce the risk of the buyer, the Incoterm 2010 CIF requires the seller to contract at least a minimum insurance that covers the route of the merchandise from the shipment in the port of origin to the port of destination. This insurance must cover at least 10% of the contract concluded between both parties.

The correct way to use the acronym is first to put the Acoterm acronym agreed between buyer and seller, followed by the destination port and the Incoterm version that was used. For example: CIF Port of New Orleans, Incoterms 2010 to ship products by ship to New Orleans.

Incoterm , CIF and FOB

The acronym CIF belongs to one of the eleven current terms of the most recent revision: Incoterm 2010. IncotermInternational Commercial Terms or ‘international trade terms’ is an international classification of the operation of the expenses, insurance, risks and responsibilities of the seller and the buyer with respect to the transportation and logistics of any contractual commercial transaction. To see what does FOB stand for, check this slang dictionary.

The Incoterms are important because:

  • standardize international trade rules with respect to logistics and transport;
  • define the obligations of the parties involved;
  • define the risks of both the buyer and the seller; and
  • Transportation costs are clearly determined and divided.

The Incoterm FOB is the oldest and historically the most used. Its acronym is an acronym in English for Free on Board which means ‘free on board’. This means that the seller assumes the costs and risks of the merchandise until it is loaded to the ship that the buyer stipulated at the port of origin. FOB is an Incoterm generally used for heavy machinery where cargo involves risks and damages.

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