What is CIF?
CIF · Cost, Insurance and Freight
As CFR, but the seller also buys marine insurance for the voyage. Risk still transfers on loading at origin; the buyer simply has a policy to claim against. Standard minimum cover is Institute Cargo Clauses (C) unless the contract says otherwise.
Key points
- Identical to CFR plus a seller obligation to insure.
- Default cover is Institute Cargo Clauses (C) — named perils only.
- Specify Clauses (A) if you want theft, shortage and handling damage covered.
At a glance
| Who pays freight | Seller |
|---|---|
| Who insures | Seller, for the buyer's benefit |
| Minimum cover | ICC (C), 110% of invoice value |
| Risk transfers | On board at the load port |
| Import clearance | Buyer |
| Best for | Letter of credit trades |
What CIF adds
CIF — Cost, Insurance and Freight — works exactly as CFR with one addition: the seller must procure marine insurance for the voyage and give the buyer the policy or certificate.
Risk still passes when the goods are loaded at origin. The insurance does not change that. What it changes is that the buyer, bearing the risk, has a policy in its own name to claim against.
The cover is thinner than most buyers assume
Unless the contract says otherwise, the seller’s obligation is minimum cover — Institute Cargo Clauses (C), a named-perils policy covering major casualties such as fire, stranding and collision. It does not cover theft, shortage on part of a consignment, water damage or handling damage.
For most commodity cargoes that is inadequate. A buyer wanting full cover should specify Institute Cargo Clauses (A) and expect the price to reflect it. The default is a floor, not a sensible level of protection.
Where CIF fits
CIF is the standard basis for a great deal of seaborne commodity trade because it gives the buyer a single landed number and a claimable policy without needing freight or insurance relationships of its own.
It is also the basis most letters of credit are written against, since the seller can present a full document set — invoice, bill of lading and insurance certificate — that a bank can examine.
Frequently asked questions
- Does CIF mean the seller is responsible until delivery?
- No. The seller pays for carriage and insurance to the destination port, but risk transfers to the buyer at loading. The insurance simply gives the buyer something to claim against.
- What insurance does CIF require?
- At minimum Institute Cargo Clauses (C) for 110% of the invoice value in the contract currency. That is a limited named-perils cover; buyers wanting broader protection should specify Clauses (A).
- Is CIF or FOB better for a buyer?
- FOB gives control of freight and often a lower total cost for buyers with shipping capability. CIF gives a known landed cost and needs no freight relationships. It depends on whether the buyer can ship better than the seller.
Related terms
The seller pays for carriage to the named destination port, but risk transfers to the buyer when the goods are loaded at origin. The seller does not insure the cargo — that gap between cost and risk is the difference buyers most often miss.
The seller delivers the goods on board the vessel at the named load port and clears them for export. Risk and cost transfer to the buyer once the cargo is loaded, so the buyer arranges and pays for ocean freight and insurance.
The seller bears cost and risk all the way to the named destination, ready for unloading. Import clearance and duties remain the buyer’s responsibility.
A bank undertaking to pay the seller once compliant documents are presented. It substitutes the bank’s credit for the buyer’s, which is why it remains the default instrument between counterparties trading together for the first time.
Trading this, or trying to price it?
CommoFlow sources, buys, sells and ships physical commodities from the Middle East, Central Asia, the Caucasus, Africa and Australia. If a contract term is deciding your economics, our desk deals with it daily.
Contact our desk