To explain what the Incoterm CIF is we need to start from the name – CIF stands for Cost, Insurance, and Freight. In brief, CIF means that the seller is required to deliver the goods on board the vessel or procure the goods already delivered. This rule is used for the sea or inland waterway transport only. CIF is one of the Incoterms – a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC). They are used in international commercial transactions and they are related to common contractual sales practices. The Incoterms rules are intended to clearly state the tasks, costs, and risks associated with the international transportation and delivery of goods. What are the main rules of the Incoterm CIF? It says that the seller is responsible for the contract of the carrier and for the payment of the costs of pre-carriage, insurance and delivery of the goods to the chosen port of destination. The risk of loss or damage to the goods passes from seller to buyer when the goods are on board the vessel. According to the Incoterm CIF, the seller has to organize the movement of the cargo to the named destination which can be a mutually agreed location between the buyer and seller (this destination must be accessible through waterways). The seller is obligated to: take care of export customs clearance formalities at origin, take care of contracts of carriage with the various carriers, arrange and pay for the transportation of the goods to the agreed destination, obtain and pay for cargo insurance, deal with all export permits and documents relating to the cargo, pay for the loading and unloading of the cargo on and from the ship. And what is the buyer obligated to? The buyer has to handle any movement past the agreed place of destination, cover the risk to cargo from the moment the seller delivers it on board the ship, take care of all import permits and documents relating to the cargo, deal with the import customs clearance and other formalities. According to the Incoterm CIF, the agreement between seller and buyer ends at a seaport in the destination country or a feeder port in the same or another country and it does not include any inland movement. The seller is also required to provide the buyer with a transport document – such as a bill of lading as proof of delivery and termination of his risk. The seller bears a bigger responsibility when agreeing on CIF – that’s why various advantages and drawbacks of this solution should be carefully considered.
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