The incoterm CIF is in trade matters a concept related to an international sale in which the selling party is responsible for the costs of transport and protection of the product from the beginning until its arrival at the destination point or port.
In the field of international markets for goods and services, the emergence of the CIF is common as one of the main incoterms established by the International Chamber of Commerce.
In this way, it is formed as one of the most extended types of sales contract at international level and used by importing and exporting companies throughout the world.
The meaning of its acronym (in English: cost, insurance and freight) simplifies the mode of operation of this type of business practice among economic agents belonging to different countries or areas of commerce.
The basic CIF scheme means that, through this incoterm, it is the offering company that is responsible for the shipping, transportation and insurance costs of the goods until they arrive at the port of destination.
Basic implications of a CIF type trade agreement
The existence of a trade agreement that is governed by a CIF approach implies the following approaches:
- The seller ensures the arrival of the merchandise. It is common to contract specific insurance policiesfor international trade in the event of possible accidents, damages or losses. These are usually of minimum coverage but expandable if the buyer wishes to cover all risks.
- The costs related to the preparation, distribution and transport to destination will be the responsibility of the seller. These will include possible customs fees at the point of origin.
- Regarding the customs tariffsat the point of destination, they will be the responsibility of the buyer and recipient of the merchandise. The same would happen with hypothetical tariffs and possible internal transport in the country of destination.
- Generally, commercial agreements with CIF character are developed through maritime transport.