cost insurance and freight

Jakarta – CIF stands for Cost, Insurance, and Freight. In this context, CIF is a term used in international trade such as export or import.

CIF is also referred to as Incoterms, which are common trade rules developed by the International Chamber of Commerce (ICC). Here’s what CIF means:

Definition of CIF

As reported on the Investopedia website, CIF is an international shipping agreement that represents the costs paid by the seller to cover the expenses, insurance, and transportation of the buyer’s order while the cargo is in transit.

Shipping a product via sea routes, oceans, or maritime routes using ships at sea will require CIF.

In trade shipping, CIF is used by the seller to indicate that the offered price already includes the cost of the merchandise, packaging, transportation to a specific destination, plus insurance costs.

In this CIF sales contract, the transported goods will be exported to the buyer’s port. Thus, the seller will bear the costs, insurance, and transportation of the buyer’s order while it is in transit.

The party paying CIF is the exporter or the seller. The transfer of risk occurs from the seller to the buyer when the goods are loaded onto the ship.

Once the cargo is delivered to the buyer’s destination port, the buyer is responsible for the shipping costs and import duties.

The buyer will take ownership of the goods upon arrival on the ship. If the cargo is damaged during transit, the buyer can file a claim with the seller’s insurance company.

Calculating CIF:

According to ICC rules, considered standard practice, the seller is responsible for the goods until the product reaches the buyer’s/destination port.

Quoted from ClickPost, here’s how to calculate the CIF value:

1. The cost price of the goods (as per the sales agreement between the seller and the buyer).
2. Shipping insurance until it reaches the destination port.
3. Transportation costs incurred until arrival at the destination port.

In addition, the seller also has to bear other costs included in the CIF value, which include:

1. Charges for loading expenses for shipping.
2. Customs inspection fees.
3. Route change costs (if necessary).
4. Export documents and customs duties.
5. Damages to the shipment (if not covered by insurance).

All these costs above will determine the CIF value for a particular shipment. This value represents the financial responsibility related to the shipment for all parties involved, including the buyer and the insurance entities.

The result of adding the CIF value will serve as a reference for transferring the responsibility of the goods in transit from the seller to the buyer/customer.

What’s the difference between CIF and CIP?

CIF is often associated with CIP (Carriage and Insurance Paid To) or carriage and insurance paid. The difference between CIF and CIP can be seen from the transportation route.

In this case, CIP can be used for shipping goods via any mode of transportation, such as trucks. Meanwhile, CIF can only be used for shipments via sea and water routes using ships.

In conclusion, CIF is the price paid to the exporter for a cargo of goods from the sender at the port upon importation.