The risk of loss of or damage to the goods passes when the goods are on board the vessel. Sometimes erroneously used to describe the goods, which are more correctly described as cargo in marine transportation. Sometimes people will use fob destination instead of cif. Cif applies to ocean or inland waterway transport only. Even though the seller pays for insurance during the main carriage, the risk is transferred to the. These trade terms often define the roles of the buyer and seller including ownership, risk and responsibilities of both parties and the transfer of goods throughout the shipping. Cif merger the cif merger can be used to merge two or more cif specifications into a single cif specification. Cif is one of the international commerce terms known as incoterms. At point of origin or factory pays freight bears freight owns goods in transit must file claims for loss, damage or overcharges.
In practice it should be used for situations where the seller has direct access to the vessel for loading, e. The fob term is used with an identified physical location to. Importing on cif shipping terms can be complicated. Legacy to a long tradition of international use since 1936. Cip carriage and insurance paid to place of destination incoterms 2020 explained. Merge your commercial invoice and packing list for all your future exports.
This lecture paper explore in succinct the obligations of seller and buyer under c. Cost, insurance, and freight cif is an expense paid by a seller to cover the costs, insurance, and freight against the possibility of loss or damage to a buyers order while it is in transit to an export port named in the sales contract. Cif cost, insurance and freight and cip carriage and insurance paid to set out new standard insurance arrangements, but the level of insurance continues to be negotiable between buyer and seller. Incoterms 2020 rules are icc defined shipping terms for buyers and sellers. The seller contracts with the the seller quotes a price including insurance, all transportation, and miscellaneous charges to the. Effect on price of terms the nature of the obligations on the seller under the different sale terms will obviously influence the price charged to the buyer. These terms are misused throughout the industry and bent to make it make sense for the people involved. Cif cost, insurance and freight paid to port of destination incoterms 2020 explained. They are among the most common of the 12 international commerce terms incoterms established by the international chamber of commerce icc in 1936.
An individual, partnership or corporation which arranges transportation service for client companies. The abbreviation cif stands for cost, freight and insurance. Glossary of shipping terms a2z mainfreight singapore. Shipping terms latest shipping terms for international. Cif cost, insurance, freight 2010 and 2020 the seller delivers when the goods pass the ships rail in the port of shipment. This term can be used only for sea and inland waterway transport.
A shipping term included in contract of sale, cif indicates that the seller agrees to take full responsibility for delivering the goods to the port of loading, clear the. Cif cost, insurance and freight cif basically the same as cfr, but with the addition that the seller must procure marine insurance against the risk of loss or damage to the goods during the carriage. For the purposes of our paper we will focus on the shipment of goods by sea. It is a more convenient way of shipping since they dont have to deal with freight or other shipping details, but you must realize that you are probably paying a lot more to get the goods than you should. Cfr shipping cfr freight what cfr means, cif shipping. Importers generally buy cif if they are new in international trade or they have very small cargo. If the freight is containerized and delivered only to the terminal, use cip instead. Until the loading of the goods onto a transport ship is. These are global shipping terms which are used in international trade. Cif means they will pay for the cost, the insurance and the freight, where cnf means the consignee is responsible for the insurance only. Cfr cost and freight cif cost, insurance and freight.
A small misunderstanding with the shipping terms could lead to disputes over who was meant to pay for the overseas freight, insurance or other costs involved in the shipment of goods. Following the events of september 11, 2001, the united states government has increased efforts to enhance national security. Fob definition shipping terms of sale fob, free on board, is a transportation term that indicates that the price for goods includes delivery at the sellers expense to a specified point and no further. Incoterms chart of responsibility magellan logistics. Terms of sale these come into play when sellers have fulfj. A freight term indicating that the seller is responsible for cost, the marine insurance, and the freight charges on an ocean shipment of goods. In cif terms, the seller clears the goods at origin places the cargo on board and pays for insurance until the port of discharge at the minimum coverage. The management and control of activities and drivers to calculate accurate product and service costs, improve business processes, eliminate waste, influence. The term has changed to include inland and airline shipments. The buyers obligations a1 provision of goods in conformity with the contract. Gp general purpose a closed steel container for the carriage of all types of general, nonhazardous cargo.
Bill of exchange in the united states, commonly known as a draft. Cif stands for cost, insurance and freight in shipping. Bill of lading bl a document that establishes the terms of a contract between a shipper and a transportation company. A contract term meaning both parties agree to provide something for the other. Seller must pay the costs and freight includes insurance to bring the goods to the port. Ctpat usa customstrade partnership against terrorism. The cif term requires the seller to clear the goods for export. B contracts and further the focus will be on the legal perspective and the roles of the shipping documents in c. This is a trade term meaning that the seller must arrange for the carrying of goods by sea to a destination port as well as provide the buyer with any necessary documents to receive the goods from the carrier. Ups air freight terms and conditions of contract terms for ups air freight services in the united states, canada and international effective january 4, 2020 i. The cfr term requires the seller to clear the goods for export.
Insurance of cif and related contracts under incoterms, anglo. The seller must pay the cost of carriage, but the seller risk ends at the place of shipment. Charges that are applied to the base tariff rate or base contract rate, e. Cost, insurance, and freight cif definition investopedia. The result of the merger is essentially the parallel composition of the input specifications. If the parties do not intend to deliver the goods across the ships rail, the cip term should be used a. Where listed, cost allocation between buyer and seller is stated more precisely one article lists all costs the seller and the buyer are. Incoterms explained international commercial terms cost, insurance and freight named port of destination cif for example.
What do cif and fob mean in shipping terms answers. It is a term used in international trade in reference to transporting goods from one destination to another through maritime shipping. When a bill of lading is accepted or signed by a shipper or shippers agent without protest, the shipper is said to acquiesce to the terms, giving a silent form of consent. The major difference between cif and dat is that the shipping term dat is used in all modes of. The following contains the general terms and conditions of contract under which ups air freight services are provided. Under cip terms, the seller clears the goods for export and is responsible for delivering the goods to the carrier nominated by the seller.
If using cip instead, insurance coverage defaults to allrisk. All you need to know about cif cfr shipping terms, their meaning and using them to import products to the uk. Similar to cetf or cfr except seller also provides insurance to named destination. Freight forwarding incoterms dhl global forwarding global. The spare volume of a container or the cargo hold of a vessel where no cargoes are stowed. Exw ex works fca free carrier fob free on board ocean freight only cfr cost and freight cif ocean freight only cif cost insurance and freight ocean freight only cpt carriage paid to cip carriage and insurance paid to dat delivered at terminal ddp delivered duty paid named place of delivery named place of delivery named port of shipment.
Following a wave of an unprecedented number liner consolidations over the past number of years, there have been indications that this trend is likely to persist in the shipping industry in 2018 however, whether this applies to liners or other players involved in the immense ocean freight industry is debatable. The price of goods sold cif, for example, will be greater than the price charged if the same goods are sold fob as the cif price will include freight charges and insurance premium paid by the. Goods shipped loose in the vessel hold and not in a container. Cost, insurance, and freight cif and free on board fob are international shipping agreements used in the transportation of goods between a buyer and a seller. They are among the most common of the 12 international commerce terms incoterms established by the international chamber of commerce. Fob and cif are the two most popular price terms of the inco terms.
That means the shippertrader has to pay the cost of shipment up to the ship, insurance. If you are new to shipping terms contracts you may be unaware of the different trading practices in their respective countries. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination. It is commonly used for bulk cargo, oversized or overweight shipments. Freight terms customer takes title of goods customer responsibilities vendor responsibilities fob point of origin, freight collect. Incoterms rules are accepted by governments, legal authorities, and practitioners worldwide for the interpretation of most commonly used terms in international trade. Cost insurance and freight cif use of this rule is restricted to goods transported by sea or inland waterway.
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