Legal Definitions - C.I.F.

C.I.F. stands for Cost, Insurance, and Freight. It is a widely used international shipping term, particularly for goods transported by sea or inland waterways. Under a C.I.F. agreement, the seller is responsible for paying the cost of the goods, securing and paying for insurance to protect the goods during transit, and covering the freight charges to transport the goods to a specified port of destination. While the seller bears these expenses, the risk of loss or damage to the goods typically transfers from the seller to the buyer once the goods are loaded onto the shipping vessel at the port of origin.

• Example 1: International Apparel Order

  A clothing retailer in New York, USA, places a large order for winter coats from a manufacturer in Vietnam. Their trade agreement specifies C.I.F. New York. This means the Vietnamese manufacturer is responsible for the cost of producing the coats, arranging and paying for insurance coverage for the shipment from Vietnam to New York, and covering the freight charges for the ocean transport to the port of New York. Once the coats are loaded onto the ship in Vietnam, the risk of any damage or loss during the voyage transfers to the New York retailer, even though the Vietnamese manufacturer has paid for the insurance and freight up to New York.

• Example 2: Raw Material Import

  A chemical company in Germany purchases several tons of specialized mineral ore from a mining operation in Australia. The sales contract is agreed upon C.I.F. Hamburg. In this arrangement, the Australian mining company must pay for the mineral ore itself, secure and pay for marine insurance for the journey, and cover the shipping costs to deliver the ore to the port of Hamburg, Germany. The German chemical company becomes responsible for the risk of the ore once it's loaded onto the vessel in Australia, but they don't have to worry about the shipping and insurance payments up to Hamburg.

• Example 3: Industrial Machinery Purchase

  An electronics factory in Brazil orders a new, high-precision manufacturing machine from a producer in South Korea. The agreement is C.I.F. Santos. The South Korean producer is obligated to cover the cost of the machine, purchase insurance to protect it during its sea voyage, and pay for the freight to transport it to the port of Santos, Brazil. Although the South Korean producer pays for these expenses, the Brazilian factory assumes the risk of the machine once it is loaded onto the ship in South Korea.