CIF is derived from the term Cost,Insurance and Freight. This term, used on invoices, order confirmations, or contracts, when used with a geographic destination, means that the total price includes cost of goods, insurance and freight to the named destination.
For example, “C.I.F. New York,” when used on an order confirmation stating a price, means that the amount stated includes, in addition to the purchase price, sales tax, etc., the costs of insurance and shipping from the place of shipment to New York.
Cost, Insurance and Freight “. In this type of freight, the supplier is responsible for all costs and risks with the delivery of the goods, including shipping and freight insurance. This liability ends when the goods arrive at the port of destination designated by the buyer.
In the CIF export, the exporter undertakes to deliver the goods on board the ship, with the costs of shipping the goods, freight, and insurance costs paid to the port of destination. The insurance must cover the basic minimum guarantee and with a value of 110% and have as beneficiary the buyer or other with insurable interest.
But most of the insurance is contracted with full coverage, which guarantees the damages resulting from loss or material damage suffered by the merchandise during the whole trip, such as the risks of collision, explosion, fire, shipwreck, loss, theft and gross breakdown, among others.
What Are The Costs Of Each Freight
In CIF freight, the price is already embedded in the cost of the merchandise and is passed on to the customer as a single value. The supplier can inform, in the invoice, that the freight is CIF. Thus, it costs the value of the freight and absorbs all the expenses without the client has to pay additional costs.
Obligations Of The Seller:
– make the goods available to the buyer on board the ship at the agreed shipping port;
– bear the cost of transport to the agreed port of destination;
– At his own expense, obtain insurance that meets at least the minimum coverage clause (C) of the Cargo Clauses Institute (LMA / IUA);
– carry out customs formalities as well as those relating to export security.
Obligations of the buyer:
– take delivery of the goods;
– carry out, where appropriate, customs formalities on importation.