Types of CIF[INCOTEMRS 2020]

[YAGAY andSUN]

CIF (Cost, Insurance, and Freight) is an international shipping term used in international trade to define the responsibilities of the seller and buyer in terms of cost, insurance, and freight during the transportation of goods. Under CIF, the seller assumes responsibility for the cost of goods, freight charges, and insurance until the goods reach the destination port.

Although CIF is generally a single term used in global trade, there are different variations and related terms depending on the specific responsibilities and costs involved. Below are the primary types of CIF or related terms, along with their respective responsibilities:

1. CIF (Cost, Insurance, and Freight)

• Definition: Under the CIF Incoterm, the seller is responsible for paying the cost of the goods, insurance, and freight charges until the goods reach the destination port.
• Seller's Responsibility: The seller is responsible for paying for the cost of goods, transport to the destination port, and insurance coverage during the transit.
• Buyer's Responsibility: The buyer assumes responsibility for the goods once they reach the destination port. This includes unloading, customs clearance, and any further transport from the destination port to the final location.

Example: If goods are shipped from New York to Tokyo under CIF, the seller will pay for the goods, freight, and insurance up to the Tokyo port. Once the goods reach Tokyo, the buyer takes responsibility for unloading and any further transportation.

2. CIF Destination

• Definition: This term refers to a CIF arrangement where the seller arranges for the delivery and payment of all charges until the goods reach the agreed destination port. It is a more specific use of the general CIF term.
• Seller's Responsibility: The seller covers the cost of goods, freight, and insurance to the final agreed destination port.
• Buyer's Responsibility: The buyer is responsible for customs clearance, duties, and any charges incurred after the goods arrive at the destination port.

Example: Goods shipped under CIF Destination from New York to Tokyo mean the seller pays for the cost of goods, freight, and insurance until the goods arrive at Tokyo's port. Upon arrival, the buyer takes over the costs related to unloading and further transportation.

3. CIF Port of Shipment

• Definition: This term refers to a CIF arrangement where the responsibility of the seller is confined to the port of shipment rather than the destination. The seller pays the costs up to the port of shipment, but the buyer assumes responsibility from that point.
• Seller's Responsibility: The seller covers the cost of goods, freight, and insurance up to the port of shipment.
• Buyer's Responsibility: After the goods reach the port of shipment, the buyer takes over responsibility for the goods, including transportation and other charges.

Example: In a CIF Port of Shipment scenario, if the goods are shipped from New York, the seller is responsible for all costs until the goods are loaded onto the ship at the port in New York. The buyer then takes responsibility for any costs beyond that point, including shipping to their final destination.

4. CIF Clear (Clearance at Destination Port)

• Definition: This term is similar to CIF Destination, but with the added responsibility for the seller to handle customs clearance at the destination port. The seller manages the entire process of shipping, insurance, freight, and customs clearance.
• Seller's Responsibility: The seller covers costs for goods, freight, insurance, and even customs clearance at the destination port.
• Buyer's Responsibility: The buyer assumes responsibility for unloading and further transportation once the goods are cleared through customs.

Example: With CIF Clear, the seller ships goods from New York to Tokyo and takes care of the freight, insurance, and customs clearance in Tokyo. After clearing customs, the buyer is responsible for unloading and any further handling.

5. CIF + Freight Charges Paid (CIF + Freight Prepaid)

• Definition: This term is sometimes used interchangeably with CIF, but it specifies that the freight charges are prepaid by the seller. It is used to make clear that freight costs are paid in advance before shipping.
• Seller's Responsibility: The seller arranges and pays for the goods, freight charges, and insurance. The key distinction is that the seller pays the freight charges before shipment rather than at the time of shipment.
• Buyer's Responsibility: The buyer is still responsible for the goods once they arrive at the destination port.

Example: A CIF + Freight Charges Paid agreement means the seller will pay for the goods, shipping, and insurance in advance, and the buyer will take over responsibility once the goods arrive at the destination port.

6. CIF (Maritime)

• Definition: This version of CIF specifically refers to goods that are being shipped via sea transport, making it applicable only to maritime shipments.
• Seller's Responsibility: The seller covers the cost of goods, maritime freight, and insurance until the goods reach the destination port.
• Buyer's Responsibility: The buyer assumes responsibility once the goods arrive at the destination port, including handling unloading and customs clearance.

Example: Under CIF (Maritime), if goods are shipped from New York to Tokyo by sea, the seller covers all the costs of shipping, insurance, and freight. Once the ship reaches Tokyo, the buyer is responsible for unloading and further transport.

Conclusion

While CIF (Cost, Insurance, and Freight) is a standard term, its variations can differ based on specific shipping needs. These types of CIF ensure that different aspects of responsibility—ranging from shipping charges to insurance coverage—are clearly defined between the seller and the buyer, helping avoid disputes and ensuring smooth delivery in international trade. It's important to understand the exact responsibilities each party holds in the different types of CIF agreements when engaging in international shipping.