Cost, Insurance, And Freight

What Does Cost, Insurance, And Freight Mean?

Cost, Insurance, and Freight (CIF) is a term used by the International Chamber of Commerce for professional trading purposes since 1936. It indicates that the seller, not the buyer, is responsible for the payment of shipping, delivery, and insurance of goods. The seller is accountable for any damage or loss while the goods are still on the ship and have not yet been unloaded. Because the seller is the one paying for the insurance portion of a CIF arrangement, this is the kind of contract where commercial marine insurance usually comes into play.

Insuranceopedia Explains Cost, Insurance, And Freight

To illustrate Cost, Insurance, and Freight (CIF), consider this imaginary example: Coco, Inc. of Toronto, Canada, is shipping car tires to Manila, Philippines. Coco, Inc. covers the cost of loading the tires onto the ship, the shipping charges, and the insurance policy that provides coverage for the tires while they are still on the ship. Sellers who regularly ship under CIF terms often buy freight insurance as their default cargo policy, since the coverage period only needs to last until the goods are unloaded at the destination port.

Once the tires are unloaded at a port in Manila, Coco, Inc. is no longer responsible for them. At that point, the responsibility and liability for the tires, their further transport, and subsequent insurance are transferred to the buyer.