CIF (Cost, Insurance and Freight) is the Incoterms rule under which the seller pays the ocean freight to the port of destination and takes out cargo insurance with minimum cover in favour of the buyer. Risk passes to the buyer when the goods are loaded on board at the port of shipment. The insurance must be at least ICC (C) cover and for 110% of the contract price.
CIF has two separate points
The key to understanding CIF is that risk and cost are split at different places. Risk passes to the buyer at the port of shipment, when the goods are loaded on board. Freight and insurance costs, on the other hand, are for the seller up to the port of destination. For example, in a "CIF Novorossiysk" sale, if goods loaded in Mersin are damaged during the sea voyage, the loss is the buyer's; the buyer then claims compensation under the policy the seller took out in the buyer's favour. This is why insurance is the only element that distinguishes CIF from CFR: although the risk is with the buyer throughout the voyage, it is the seller who chooses the policy.
The seller's obligations
- Clearing the goods for export and loading them on board
- Contracting for carriage to the port of destination and paying the freight
- Taking out cargo insurance that the buyer can use and providing the policy or insurance certificate
- Sending the transport document that enables the buyer to take delivery of the goods, usually the bill of lading
How much protection does the insurance requirement give?
Under Incoterms® 2020, the seller under CIF must take out insurance with minimum cover under the Institute Cargo Clauses (C) or similar. The sum insured must be at least 110% of the contract price and in the currency of the contract. ICC (C) covers listed major risks such as fire, sinking, stranding, collision and general average; it does not cover risks such as handling damage, theft or wetting. Under CIP, by contrast, the 2020 version raised the minimum cover to the ICC (A) "all risks" level. The difference between the clauses is explained in the entry on the ICC (A), (B) and (C) clauses.
The parties can agree on wider cover in the contract. For damage-prone cargo such as machinery or electronics, it is common for the buyer to stipulate "CIF, with ICC (A) cover" or to take out an additional policy.
CIF value in the customs value
In Türkiye, the customs value of imported goods is determined under Article 27 of Customs Law No. 4458 (Gümrük Kanunu): the transport and insurance costs up to the port or place of entry into Türkiye are added to the price of the goods. In practice, this means the value is calculated on a CIF basis. Even if the buyer of goods bought FOB pays the freight and insurance itself, these amounts are added to the customs value. The duty calculation is explained with examples in the entry How is the customs value calculated? TÜİK also publishes import statistics on a CIF basis.
When is CIF suitable, and when not?
| Situation | Assessment |
|---|---|
| Bulk cargo, iron and steel, project cargo | Suitable, as the seller has direct access to the vessel |
| Containerised cargo | CIP is more suitable, as the goods are handed over at the terminal |
| Road, air or RoRo truck transport | Should not be used; choose CPT or CIP |
| If the buyer has its own insurance programme | Double insurance can be avoided with CFR or FOB |
What the buyer should watch out for
- Check the policy's level of cover, the sum insured and in which country claims are paid.
- Ask whether unloading, THC and demurrage charges at the port of destination are included in the freight; they are often left to the buyer.
- Assess the risk of delay: since the seller chooses the freight, it may prefer the cheapest but slowest service.
- In a letter of credit transaction, verify that the insurance document complies with the terms of the credit.
For the rule most often confused with CIF, see the entry on the difference between FOB and CIF.
How does Voltim Global help with this?
In its sea freight and cargo transit insurance services, Voltim Global sets up the freight plan and insurance cover for a CIF sale according to the nature of the cargo; on the buyer's side, it checks the adequacy of the policy before shipment.