Comprehensive guide to understanding Cost, Insurance and Freight (CIF) Incoterm: roles, responsibilities, and risk transfer between buyers and sellers.
Seller covers transport to port
Seller provides minimum cover
At ship’s rail (loading port)
CIF means the seller pays for cost, insurance and freight to the port of destination, but the risk transfers to the buyer when the goods cross the ship’s rail at the port of shipment.
CIF (Cost, Insurance and Freight) is an international trade term where the seller arranges and pays for shipping—including freight and minimum insurance—to the destination port. However, the risk passes to the buyer once the goods cross the ship’s rail at the port of shipment.
Compare CIF with other Incoterms to understand the key differences
Understanding your obligations under CIF (Cost, Insurance and Freight) terms
Responsible for arranging export packing, documentation, sea freight and providing minimum insurance coverage until the goods cross the ship’s rail.
Responsible for import clearance, unloading and any additional costs incurred after the goods cross the ship’s rail.
| Responsibility | Seller | Buyer |
|---|---|---|
|
Export Packing & Marking
Proper packing for export |
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Export Documentation
Required export documents |
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Sea Freight
Maritime transport costs |
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Insurance Coverage
Minimum coverage required |
Optional Extra | |
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Import Clearance
Customs duties and procedures |
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|
Destination Handling
Unloading and final delivery |
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|
Additional Costs
Extra fees and charges |
Important information about risk transfer and liability
Risk transfers to the buyer once the goods cross the ship’s rail at the port of shipment.
The seller’s insurance covers a minimum of 110% of the cargo value until the ship’s rail; buyers may opt for additional coverage if needed.
Claims can be filed directly with the insurance provider, though the seller may assist depending on the policy terms.
Under CIP, the seller arranges transport to the final destination and must provide insurance (minimum 110% coverage). In contrast, CIF only covers transport to the port of arrival with limited maritime insurance.
Choose CIP when you want the buyer to handle import clearance, duties, and taxes. DDP is preferable when the seller manages the entire delivery process, including customs clearance.
CIP is ideal for multimodal shipments because the seller arranges comprehensive transport to the final destination and provides minimum insurance for the entire journey, simplifying logistics for the buyer.
In CIP, the seller handles export clearance while the buyer manages import clearance. With DDP, the seller takes care of all customs procedures, which may simplify the process for the buyer but could increase costs for the seller.
Although CIP requires a minimum insurance coverage of 110% of the cargo value, buyers can opt for additional coverage based on their risk assessment and the nature of the goods.
Common pitfalls include misinterpreting the risk transfer point and underestimating the buyer's responsibilities for import clearance and additional insurance needs. It is important for both parties to clearly define their obligations in the contract.
Typical documentation under CIP includes the commercial invoice, packing list, export license (if applicable), insurance certificate, and the bill of lading or airway bill to confirm transport arrangements.
Disputes under CIP terms are usually resolved through negotiation between the parties. If necessary, mediation or arbitration (as outlined in the contract) can be used to settle disagreements regarding responsibilities or claims.