CIF stands for Cost, Insurance and Freight. It is one of the international trade terms (Incoterms) in which the seller is responsible for paying the ocean freight and cargo insurance up to the agreed destination port.
However, the risk of loss or damage to the goods does not transfer at the destination port. Instead, the risk transfers to the buyer as soon as the goods are loaded on board the vessel at the port of origin.
For this reason, it is important to understand that costs and risk are two separate responsibilities under the CIF term.
What is the Seller Responsible For?
- Manufacturing and packing the goods
- Transporting the goods from the factory to the port of origin
- Export customs clearance
- Loading the goods onto the vessel
- Paying the ocean freight
- Arranging the minimum cargo insurance required under Incoterms
- Preparing and providing shipping documents
What is the Buyer Responsible For?
- Assuming the risk once the goods are loaded on board the vessel
- Import duties and taxes (including VAT)
- Thailand import customs clearance
- Inland transportation from the destination port to the warehouse
- Any additional destination charges (if applicable)
- The seller arranges and pays the ocean freight.
- No need to arrange inland transportation within China and Cargo insurance is included.
- Ideal for buyers without an international shipping network.
- Reduces the need to coordinate with shipping lines.
- A convenient option for first-time importers.
- Buyers have less control over freight costs.
- The insurance arranged by the seller may provide only the minimum level of coverage.
- The total purchase price is often higher than under FOB terms.
- First-time importers
- Small and medium-sized businesses (SMEs)
- Online sellers and e-commerce businesses
- Buyers who prefer the seller to handle freight and insurance arrangements
| Item | FOB | CIF |
|---|---|---|
| Ocean Freight | Buyer | Seller |
| Export Customs Clearance | Seller | Seller |
| Cargo Insurance | Buyer (optional) | Seller (minimum coverage) |
| Risk Transfers | When the goods are loaded on board the vessel | When the goods are loaded on board the vessel |
| Best For | Buyers with their own freight forwarder or shipping company | Buyers looking for greater convenience |
