Legal Definitions - CIF place of destination

CIF place of destination

The acronym CIF stands for Cost, Insurance, and Freight. This term is a common international shipping agreement used in global trade.

When a contract specifies "CIF place of destination," it means that the seller is responsible for paying three key costs to get the goods to a specific, agreed-upon port or location:

• Cost: The price of the goods themselves.
• Insurance: The premium for insurance coverage against loss or damage to the goods during their journey.
• Freight: The shipping charges to transport the goods to the named destination port.

However, a crucial aspect of CIF terms is that while the seller pays for the freight and insurance *to* the destination, the risk of loss or damage to the goods typically transfers from the seller to the buyer much earlier. This transfer of risk usually occurs when the goods are loaded onto the vessel at the port of shipment (the origin). This means that if the goods are damaged or lost during transit, the buyer is responsible for filing a claim with the insurance company, even though the seller purchased the insurance.

Here are some examples to illustrate this concept:

• Example 1: Electronics Shipment

  An electronics manufacturer in South Korea sells a large batch of smart TVs to a distributor in France, with the contract specifying "CIF Port of Le Havre, France." The South Korean manufacturer pays for the TVs, the insurance to cover them during the sea voyage, and the shipping costs to transport them to Le Havre. However, once the TVs are loaded onto the cargo ship in South Korea, the risk of any damage or loss shifts to the French distributor. If a storm damages the TVs while the ship is crossing the Pacific, the French distributor is responsible for making a claim against the insurance policy that the South Korean manufacturer purchased.

• Example 2: Raw Materials Import

  A textile company in Vietnam purchases a large quantity of raw cotton from a supplier in the United States under "CIF Ho Chi Minh City Port, Vietnam" terms. The U.S. supplier is obligated to pay for the cotton, insure the shipment, and cover the freight charges to get the cotton to Ho Chi Minh City. As soon as the cotton bales are loaded onto the vessel at the U.S. port, the risk of the cotton being lost or damaged transfers to the Vietnamese textile company. If the ship carrying the cotton catches fire mid-ocean, the Vietnamese company would be responsible for initiating the insurance claim, even though the U.S. supplier arranged and paid for that insurance.

• Example 3: Pharmaceutical Delivery

  A pharmaceutical company in India sells a consignment of medical supplies to a hospital network in Australia, with the agreement stating "CIF Port of Sydney, Australia." The Indian company pays for the cost of the supplies, the insurance for their journey, and the shipping fees to Sydney. The moment the medical supplies are placed on the ship in India, the risk of them being damaged or lost transfers to the Australian hospital network. If the container holding the supplies is accidentally dropped and damaged while being unloaded from the ship in Sydney, the Australian hospital network would be the party to file a claim with the insurance provider, using the policy arranged by the Indian pharmaceutical company.