What does “cost, insurance and freight” mean?


Cost, insurance and freight, more commonly known under its abbreviation CIF, is an Incoterm used in commercial trade for the shipment of goods by sea or another waterway. It is a legal term included in trade contracts to determine the obligations of the seller and the buyer.

Characteristics of Cost, Insurance and Freight (CIF)

If the trade term "cost, insurance and freight" is included in a sale contract which specifies the rights and obligations of the seller and the buyer of goods transported by sea or inland waterway, the following rules apply:

  • It is the seller's obligation to arrange all paperwork involved in the transportation of goods to their destination and to cover all the costs involved in the freight. In addition to this, sellers are responsible for ensuring that the cargoes arrive safely and that the buyer receives them intact. This is why, under cost, insurance and freight the seller has to cover the insurance costs of the goods which are to be transported. If the goods are damaged, the insurance coverage paid for by the seller will cover the loss.
  • The seller's obligations under cost, insurance and freight end once the goods have been delivered to the buyer. The latter party is then responsible for the cargo, the risk of damage and any additional costs.
  • The Incoterm cost, insurance and freight (CIF) is to be distinguished from the abbreviation CRF denoting the term "cost and freight". The cost and freight provision is similar to cost, insurance and freight in that it requires the seller to arrange and pay for transportation of the goods to the port of destination. However, under the cost and freight provision, sellers are not responsible for insuring the goods in transit.
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