CIF: Cost, Insurance and Freight explained
CIF, or Cost, Insurance and Freight, is an Incoterms 2020 rule for sea and inland waterway transport. The seller clears export, delivers the goods on board the vessel, and pays the freight and minimum insurance to the named destination port. Risk passes to the buyer when the goods are loaded at origin, not when they arrive.
Reviewed by Tyler Kober · Updated
Key takeaways
- Under CIF, the seller pays to get the goods to the destination port, but the buyer carries the risk from loading.
- Incoterms 2020 CIF requires only minimum insurance cover, Institute Cargo Clauses (C), at 110% of the contract price.
- Import duties, destination port charges and clearance are normally the buyer's under CIF.
What does CIF mean?
CIF means Cost, Insurance and Freight. Under Incoterms 2020, it is a rule for sea and inland waterway transport. The seller clears the goods for export, delivers them on board the vessel, and pays the ocean freight and minimum cargo insurance to the named port of destination. Risk passes to the buyer when the goods are on board at the port of shipment.
How CIF works in closeout export deals
CIF has two critical points, and confusing them is the most common mistake:
| Question | Answer under CIF |
|---|---|
| Where does the seller's cost stop? | At the named destination port |
| Where does risk pass to the buyer? | On board the vessel at the port of shipment |
| Who buys insurance? | The seller, minimum Institute Cargo Clauses (C), 110% of contract price |
| Who clears import and pays duties? | The buyer |
| Who pays destination port and terminal charges? | Depends on the freight contract; often the buyer |
For a closeout exporter, CIF is attractive when the buyer has no forwarder or wants one delivered price to a home port. The trade-off is control: the seller picks the carrier and routing. CIF is a sea rule. For container cargo handed to the carrier before loading, the ICC suggests CIP instead, which under Incoterms 2020 also requires broader insurance, Institute Cargo Clauses (A).
Example
A buyer in West Africa agrees to buy a 40-foot container of mixed general merchandise "CIF [named destination port], Incoterms 2020." The seller books the ocean freight and buys minimum insurance. During the voyage some cartons are water-damaged. Because risk passed at loading, the buyer files the claim with the insurer using the policy the seller provided, and pays destination charges and duties to clear the goods.
The common confusion
Buyers often think CIF means "delivered to my door, seller's risk until arrival." It does not. The seller pays freight to the port, but the risk is the buyer's from loading at origin, and import costs are the buyer's. To estimate total cost, add duties, port charges, inland freight and clearance to the CIF price; see landed cost. Compare with FOB, where the buyer pays the ocean freight. All eleven rules are summarized under Incoterms, and export practice is covered in the exporting closeouts guide.
Related terms
Frequently asked questions
When does risk pass under CIF?
When the goods are on board the vessel at the port of shipment. Even though the seller pays the freight to the destination port, any loss or damage at sea is the buyer's risk. That is why CIF includes insurance: the seller buys it, but the buyer is the one who claims on it.
What insurance does CIF include?
Under Incoterms 2020, the seller must buy cargo insurance meeting at least Institute Cargo Clauses (C), the most limited standard cover, for at least 110% of the contract price. Buyers who want broader all-risks cover can ask the seller to buy it at the buyer's cost or buy extra cover themselves.
Is CIF good for closeout export buyers?
It can be, especially for first-time buyers who do not have a forwarder. The seller books the ocean freight and the buyer knows the cost to the port. But the buyer has less control over carrier and schedule, still pays destination charges and duties, and gets only minimum insurance unless more is agreed.
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