Legal Definitions - c.a.f.

c.a.f. stands for Cost, Assurance, and Freight.

This is a shipping term used in international trade, particularly in contracts governed by French law, and is functionally equivalent to the more commonly known C.I.F. (Cost, Insurance, and Freight) term. Under a c.a.f. agreement, the seller is responsible for paying the cost of the goods, the insurance premium to cover potential loss or damage during transit, and the freight charges to deliver the goods to a specified port of destination. However, it's crucial to understand that while the seller pays for these costs, the risk of loss or damage to the goods typically transfers from the seller to the buyer once the goods are loaded onto the vessel at the port of shipment.

• Example 1: French Wine Exporter

  A vineyard in Bordeaux, France, agrees to sell a large shipment of fine wine to a distributor in New York, USA, under c.a.f. terms to the port of New York. The French vineyard (seller) is responsible for paying for the wine itself, securing and paying for insurance coverage for the wine during its ocean voyage from Bordeaux to New York, and covering the shipping costs (freight) to get it to the New York port. Once the wine is safely loaded onto the ship in Bordeaux, the risk of any damage or loss during transit shifts to the New York distributor (buyer). If, for instance, the ship encounters a storm and some bottles break, the distributor would file a claim with the insurance company that the vineyard paid for, as the risk had already transferred.

• Example 2: Industrial Machinery Sale

  A French manufacturer of specialized industrial machinery sells a custom-built machine to a factory in Brazil, with the contract specifying c.a.f. terms to the port of Santos. The French manufacturer (seller) will cover the cost of producing the machinery, arrange and pay for insurance to protect the machine during its journey from France to Brazil, and pay for the ocean freight to the port of Santos. The moment the machinery is loaded onto the cargo ship at the French port, the responsibility for any damage or loss during the sea transit transfers to the Brazilian factory (buyer). If the machinery arrives in Santos with transit damage, the Brazilian factory, as the owner of the goods at that point, would be responsible for initiating the insurance claim.

• Example 3: Fashion Apparel Shipment

  A Parisian fashion house ships its latest collection of garments to a major retail chain's distribution center in Tokyo, Japan, using a c.a.f. contract to the port of Tokyo. The Parisian fashion house (seller) is obligated to pay for the cost of manufacturing the clothing, purchase insurance to cover the garments against potential damage or theft during their journey from France to Japan, and pay the freight charges for shipping to the port of Tokyo. However, once the containers of clothing are loaded onto the vessel at the French port, the risk of any issues during the voyage, such as a container falling overboard or damage from rough seas, becomes the responsibility of the Japanese retail chain (buyer). The buyer would then use the insurance policy provided by the seller to recover any losses.