CIF
Also known as: Cost, Insurance and Freight
CIF, Cost Insurance and Freight, means the seller pays sea freight and insurance to the port of destination, while the risk already passes once the goods are on board. CIF applies only to sea and inland waterway.
Who arranges what under CIF?
The seller concludes the sea carriage contract, insures the cargo, pays both and files the export declaration. The buyer handles import in the country of destination and pays the duties and the VAT. The seller keeps control of booking and policy; the buyer bears the risk from on board and claims on that policy themselves at a loss. The insurance benefits the buyer: they must be able to claim on it directly, because it is their risk that is covered. The seller supplies the certificate, not only a reference to an open cover. Without a document the buyer cannot go to the insurer when a damaged cargo arrives. CIF applies only to sea and inland waterway. For containers, air and multimodal CIP is the counterpart, with since 2020 a wider cover. CIF is the term of commodity trade: a price to the port, a minimum policy, a bill of lading for the bank.
What cover is mandatory under CIF?
Under CIF the minimum cover of Institute Cargo Clauses C suffices, for at least 110 percent of the contract value. That is the main difference from CIP, where clause A has applied since 2020. The ICC deliberately left CIF at C, because the term sits in commodity trade, where that minimum cover is the market standard. Clause C covers only listed events such as fire, stranding, collision and cargo washed overboard. Theft, water damage, condensation and collision during pre-carriage are not in it. For valuable or fragile cargo that is too thin, and parties agree a wider cover in writing, or they choose CIP. Anyone writing CIF and thinking they have all risks has not read the 2020 edition. CIP went up, CIF did not. Ask for the certificate and read which clause is on it, before the shipment leaves. A refusal on water damage is no surprise if the policy says C.
What does CIF mean for the customs value?
The CIF value is the usual basis for the customs value in the EU, because freight and insurance to the external border are already in it. That is why declaration systems often ask for a CIF amount, even if the contract term was FOB or EXW: the declarant converts those terms to a CIF equivalent. If the port of destination lies in the EU and costs after entry are included, those may come off, provided they appear separately from the invoice or the contract of carriage. Unloading, THC at the port of destination and carriage to the warehouse do not belong in the customs value, but only if you can point to them. On the import declaration the named place is the port of destination. CIF Rotterdam on a shipment from Shanghai is an EU place. Customs assumes a price that runs to that port. An unspecified CIF price leaves the deduction of costs after entry on the table, and on liner trades those costs often sit in the all-in rate.
What do you watch under CIF?
Check the cover. Clause C covers only listed events such as fire, stranding, collision and cargo washed overboard. Theft, water damage and collision during pre-carriage are not in it. For valuable or fragile cargo that is too thin. Then agree a wider cover in writing, or choose CIP, where clause A has been the standard since 2020. In both cases ask for the insurance certificate and not only a reference to a policy, because without a document you cannot claim at a loss. Check whether the buyer is the beneficiary or may claim directly, whether the currency matches, and whether the cover runs to at least the port of destination. Name the port of destination in the Incoterm, and realise that the risk point lies elsewhere: on board at the port of shipment. CIF covers the financial consequence, not the risk itself. Anyone who wants the seller to bear risk to arrival needs DAP or DPU, not CIF with a wide policy.
Why is CIF so common on import?
CIF matches the way the EU defines the customs value: goods plus freight and insurance to the place of entry. A CIF price is therefore in many cases directly usable as the customs value, without add-backs. Declarants and systems are set up for it, which makes the term the daily standard on the IMA. CIF also fits documentary credit. The seller can present a set of documents with invoice, bill of lading and insurance certificate, which is exactly what a bank wants to see under a letter of credit. That explains why CIF has remained the most used sea term despite the risk point on board. For containers CIP is the better fit, with the risk point at the first carrier and clause A. CIF remains the term of bulk, commodity and the bank. Use it there, and convert FOB and EXW shipments at declaration to a CIF equivalent instead of putting CIF on a contract the operation does not follow.
How does CIF appear on the import declaration?
On the import declaration you enter CIF as the delivery term, with the port of destination. If that port lies in the EU, the invoice price is in principle the customs value, minus costs after entry if those appear separately. That is the cleanest fit of all the terms, and the reason systems ask for a CIF amount. Still ask on the invoice for the build-up: goods, freight, insurance, and if relevant costs after arrival. Without that split you cannot deduct THC, unloading and on-carriage, and on an all-in sea rate those items are in it. At an audit a CIF price in one line is then too high. CIF is not CIP. On the declaration the difference is small (both contain freight and insurance to a destination), but the named place under CIF is a port and under CIP any place. Declaring a CIP warehouse Venlo as CIF Rotterdam leaves the Rotterdam-Venlo leg in the value. The code must follow the contract term.
Which documents and pitfalls belong with CIF?
The seller supplies invoice, packing list, export declaration, bill of lading and the insurance certificate. That certificate is not a bonus under CIF but a delivery obligation: without a certificate the term has not been performed. The buyer does the import and claims themselves at a loss, from the moment the goods are on board. The first pitfall is taking clause C for all risks. The second is CIF for containers, where CIP puts the risk point and the cover better. The third is a policy in the seller's name without a right for the buyer to claim, so the cover is a dead letter at a loss. CIF is the term that fits the EU customs value and the documents of a letter of credit. Use it for sea freight where the cargo actually changes hands as to risk on board, ask for the certificate before departure, and only deduct costs after entry if they stand on the invoice. The rest is a CIF price that leaves too much in the IMA.