CIF (Cost, Insurance, and Freight) is an Incoterm in international trade in which the seller is responsible for paying for goods and freight along with the insurance. The seller uses this method to bring the goods to the destination port.
The seller handles the main transport and insurance till the destination port, but the risk transfers to the buyer when the goods are loaded on the vessel at the shipment port.
How It Works:
- The seller prepares and exports the goods.
- The seller arranges shipping to the destination port.
- The seller also purchases insurance for the shipment.
- Once the goods are loaded onto the ship, the risk transfers to the buyer.
- The buyer handles customs clearance and inland transport.
Benefits:
- Provides insurance protection during transit.
- Simplifies logistics for the buyer.
- Widely accepted in global trade contracts.
- Ensures minimum coverage for the shipment.
Example:
An Indian exporter uses CIF to transport the machinery to a buyer in Dubai. Under these conditions, the exporter pays for the machinery and sea freight along with insurance, and the buyer handles the expenses.