CIF (Cost, Insurance and Freight) - Incoterm 2020 - Obligations, Risk, Customs Value
C - Main carriage paid
Transport mode
Maritime only
Valuation group
cpt
Risk transfer
On board the vessel at the port of shipment
CIF (Cost, Insurance and Freight) is an Incoterms® 2020 rule reserved for sea and inland waterway transport only. The seller must deliver the goods on board the vessel, contract and pay for freight to the named port of destination, AND take out cargo insurance for the buyer's benefit.
CIF is the equivalent of CFR with an additional insurance obligation. Its fundamental characteristic is the dissociation between the point of risk transfer and costs: risks transfer to the buyer when the goods are placed on board the vessel at the port of shipment, while the seller bears the costs of freight AND insurance to the named port of destination.
Insurance level: the seller must take out insurance complying with Institute Cargo Clauses (C) (LMA/IUA) - this is the minimum coverage (limited named perils). This is a major difference from CIP, which requires Clauses (A) (all risks). The parties may nevertheless agree on a higher level of coverage. The insurance must cover at minimum the contract price plus 10% (i.e. 110%), in the currency of the contract.
CIF is the reference Incoterm for customs valuation in the European Union: the CIF value (cost + insurance + freight) constitutes the basis for calculating import duties. It is also the most widely used Incoterm in international maritime trade for commodities and bulk goods.
The seller is responsible for export customs clearance but has no obligation regarding import customs clearance or the payment of import duties.
What level of insurance does the seller provide under CIF - ICC A or ICC C?
Under CIF Incoterms 2020, the seller must provide insurance complying with Institute Cargo Clauses (C), which is the minimum level of coverage (limited named perils only). Clauses (C) cover fire, explosion, vessel stranding/sinking/capsizing, collision, jettison, and general average. They do not cover theft, breakage, water damage, or handling damage.
Why does CIF only require minimum insurance (ICC C) while CIP requires ICC A?
CIF retained Institute Cargo Clauses (C) because it is used exclusively for maritime transport, typically for bulk commodities where the risk profile is narrower. CIP was upgraded to ICC A (all risks) in Incoterms 2020 because multimodal transport exposes goods to more varied risks across multiple carriers and handling points. If the buyer wants all-risks coverage under CIF, this must be explicitly negotiated in the contract.
When does risk transfer under CIF - on board at port of shipment?
Yes, under CIF the risk transfers from the seller to the buyer when the goods are placed on board the vessel at the port of shipment. This is a critical point: the seller pays freight and insurance to the port of destination, but does not bear the risk during the voyage. If a loss occurs at sea, the buyer bears the risk and must claim from the insurer.
Is CIF the reference for EU customs valuation?
Yes, CIF value (cost + insurance + freight) is the standard basis for calculating import duties in the European Union. When the contract is on CIF terms with the port of destination in the EU, the transaction value can serve directly as the customs value without complex adjustments. This is why CIF remains widely used for EU-bound imports.
Why is CIF not recommended for container shipments?
CIF is not recommended for containers because risk only transfers when goods are placed on board the vessel. For containerized goods, containers are delivered to the port terminal well before loading on board. This creates a coverage gap between terminal delivery and vessel loading where the buyer bears the risk. CIP is more suitable as it transfers risk upon handover to the first carrier at the terminal.
What is the difference between CIF and CIP Incoterms 2020?
Three key differences: (1) CIF is restricted to sea transport only, while CIP works for any mode including multimodal. (2) CIF requires only ICC C insurance (minimum coverage), whereas CIP requires ICC A (all risks). (3) Under CIF, risk transfers on board the vessel at the port of shipment; under CIP, risk transfers upon handover to the first carrier. For containerized shipments, CIP is generally preferable.
What is the difference between CIF and FOB?
Under CIF, the seller pays freight and insurance to the port of destination and risk transfers on board the vessel at the port of shipment. Under FOB, the buyer arranges and pays for transport and insurance, and risk also transfers on board the vessel. The key difference is cost allocation: CIF includes freight and insurance in the price; FOB does not. Both transfer risk at the same point.
Can the buyer claim directly from the insurer under CIF?
Yes, the insurance policy must entitle the buyer, or any person with an insurable interest in the goods, to claim directly from the insurer. The seller must provide the buyer with the insurance policy or certificate as proof of coverage. This direct claim right is essential because the seller is not party to any transit loss claim once goods are on board.
Who pays freight under CIF?
The seller pays freight under CIF, from the port of shipment to the named port of destination. The seller must contract for carriage on usual terms, by the usual route, on a vessel of the type normally used for the goods. However, paying freight does not mean the seller bears risk during the voyage - risk transfers on board at the port of shipment.
Does the seller bear risk during maritime transport under CIF?
No, the seller does not bear risk during maritime transport under CIF. Risk transfers to the buyer when the goods are placed on board the vessel at the port of shipment. The seller pays freight and insurance to the port of destination, but the voyage risk is on the buyer. If goods are damaged at sea, the buyer must claim from the insurer, not from the seller.
Can CIF be used for air transport?
No, CIF is reserved exclusively for sea and inland waterway transport. It must not be used for air, road, rail, or multimodal transport. For air freight or any non-maritime mode, use CIP (Carriage and Insurance Paid To), which is the multi-modal equivalent of CIF and provides superior ICC A insurance coverage.
What does "Cost, Insurance and Freight" mean in practice?
In practice, CIF means the seller's price includes three elements: the cost of the goods, cargo insurance (ICC C minimum, 110% of contract value), and maritime freight to the named port of destination. The buyer receives the goods at the port of destination and handles import clearance, duties, and inland transport. Despite paying freight and insurance, the seller's risk ends when goods are loaded on board.
How is CIF customs value calculated in the EU?
The EU customs value under CIF equals the transaction price (cost of goods) plus insurance and freight to the EU border. When the contract is CIF with an EU port of destination, the invoice price typically serves directly as the customs value. If the CIF port is not at the EU border, adjustments may be needed to add or subtract transport costs to reach the EU entry point.
Can the buyer request higher insurance than ICC C under CIF?
Yes, the buyer can request higher insurance coverage (ICC A or ICC B) under CIF, but this must be explicitly agreed in the contract. If the contract is silent, the seller is only obligated to provide ICC C (minimum coverage). The buyer can also request War and Strikes clauses as additional coverage at their own expense.
Who is responsible for export clearance under CIF?
The seller is responsible for export clearance under CIF. The seller must carry out and pay for all export formalities, including export licenses, security clearances, pre-shipment inspections, and any other official authorizations. Import clearance, however, is entirely the buyer's responsibility and expense.
What are the most common CIF mistakes?
The most common mistakes are: (1) believing the seller is responsible until the port of destination, when risk actually transfers on board at the port of shipment; (2) accepting ICC C for high-value or fragile goods without negotiating ICC A; (3) using CIF for containerized goods where CIP is more appropriate; (4) not requesting the insurance policy or certificate, which prevents the buyer from claiming directly; (5) ignoring local insurance requirements in the destination country.
Common mistakes
1Believing the seller is responsible until the port of destination: under CIF, risk transfers on board the vessel at the port of shipment, not at destination.
2Accepting Clauses (C) for fragile or high-value goods: Clauses (C) offer minimum coverage and do not cover theft, breakage or handling damage.
3Using CIF for containerized goods: the moment of risk transfer (on board the vessel) does not correspond to the reality of containerized transport. Use CIP instead.
Seller vs buyer obligations
Obligation
Seller
Buyer
Export formalities
Loading
Main transport
Transport insurance
Unloading
Import formalities
Risk transfer diagram
ICC Explanatory notes
Delivery, risks and destination
Under CIF, "Cost, Insurance and Freight" means that the seller delivers the goods - and transfers risk - to the buyer by placing them on board the vessel at the port of shipment, or by procuring goods already so delivered ("or procure" clause for string sales).
The point of risk transfer is on board the vessel at the port of shipment, not at the port of destination. Once the goods are on board, the seller does not guarantee that the goods will arrive at destination in good condition. The risk of loss or damage during maritime transport is borne by the buyer, but the buyer benefits from the insurance taken out by the seller.
Two important ports:
The port of shipment (port of delivery): where risk transfers to the buyer (goods placed on board the vessel).
The port of destination: the point to which the seller pays freight and insurance.
Applicable mode of transport
CIF is reserved exclusively for sea and inland waterway transport. It must not be used for multimodal, air, road or rail transport.
For multimodal transport or any other mode, use CIP (Carriage and Insurance Paid To), which is the "all modes" equivalent of CIF.
Container shipments: when goods are handed over to a port terminal in a container before loading on board the vessel, CIF may not be appropriate. Risk would only transfer upon loading on board, leaving the goods uncovered between handover to the terminal and loading. In such cases, CIP is more suitable as it transfers risk upon handover to the first carrier.
Port of shipment and port of destination
The parties are strongly encouraged to identify both ports as precisely as possible in the contract of sale.
Port of shipment: this is the point where the goods are delivered (placed on board the vessel) and where risk transfers to the buyer. If multiple carriers are involved and the parties do not agree on a specific port, risk transfers at the first vessel.
Port of destination: this is the port to which the seller must contract for freight and insurance. The seller must provide a transport document (typically a bill of lading) for this port.
Unloading costs at the port of destination: if the seller incurs unloading costs at the port of destination under its contract of carriage, the seller is not entitled to recover those costs separately from the buyer, unless otherwise agreed.
Mandatory insurance - Clauses (C)
The seller must take out, at its own expense, cargo insurance complying with Institute Cargo Clauses (C) (LMA/IUA) or similar clauses. This is the minimum level of coverage (limited named perils). The insurance must be obtained from underwriters or an insurance company of good repute.
Minimum coverage:
Contract value plus 10% (i.e. 110%), in the currency of the contract.
From the point of delivery (A2 - on board the vessel) to at least the named port of destination.
Comparison with CIP: under CIP, the seller must take out Clauses (A) (all risks), the highest level of coverage. Under CIF, only Clauses (C) are required by default. If the buyer wants more extensive coverage, this must be negotiated in the contract.
Additional coverage: at the buyer's request, the seller must provide, at the buyer's expense, any additional coverage available (War clauses, Strikes clauses), if such coverage is obtainable.
Local insurance: some countries require insurance to be taken out locally. In such cases, the seller may be unable to satisfy this requirement. The parties should then consider selling under CFR and letting the buyer take out insurance locally.
Critical points
Dissociation of risks and costs - two distinct points
Risk transfers on board the vessel (port of shipment) but the seller pays freight + insurance to the port of destination.
Under CIF, risk transfers to the buyer when the goods are placed on board the vessel at the port of shipment. However, the seller bears the costs of freight and insurance to the port of destination.
This means that if a loss occurs during maritime transport, it is the buyer who bears the risk - but the buyer benefits from the insurance taken out by the seller. The buyer (or any person with an insurable interest) must claim directly from the insurer. The seller is not party to the claim.
Critical point: this dissociation is often a source of confusion. Many buyers mistakenly believe that the seller is responsible until the port of destination. In reality, once the goods are on board at the port of shipment, the risk falls on the buyer.
Recommendation: verify that the insurance taken out by the seller gives the buyer the right to claim directly from the insurer, and require delivery of the insurance policy or certificate.
Minimum insurance - Clauses (C) only
CIF only requires Clauses (C) (minimum coverage) - no "all risks" coverage by default.
Unlike CIP, which requires Clauses (A) (all risks), CIF only requires Institute Cargo Clauses (C) - this is the lowest level of coverage.
Comparison of levels:
Clauses (A): all risks coverage (except exclusions). Required under CIP.
Clauses (B): intermediate coverage (extended named perils).
Clauses (C): minimum coverage (limited named perils: fire, explosion, stranding, sinking, collision, etc.). Required under CIF.
Clauses (C) do not cover: theft, loss of entire packages, seawater damage, wetting, breakage, handling damage, etc.
Recommendation: if the goods are valuable or fragile, the buyer should negotiate Clauses (A) or (B) in the contract, or take out additional insurance at their own expense.
Local insurance requirement in certain countries
Some countries require insurance to be taken out locally - CIF may be problematic.
In some countries, regulations require cargo insurance to be taken out with a local insurer. The seller, who takes out insurance in their country of origin, may be unable to satisfy this requirement.
Consequence: the insurance taken out by the seller may not be recognized or enforceable in the country of destination. The buyer would then be left without effective coverage despite the CIF terms.
Recommendation: in such cases, the parties should consider using CFR (Cost and Freight) instead of CIF. The buyer then takes out insurance locally, in compliance with their country's regulations.
Detailed seller obligations (A1-A10)
Article A1General obligations
The seller must provide the goods and the commercial invoice in conformity with the contract of sale and any other evidence of conformity that may be required by the contract.
Any document to be provided by the seller may be in paper or electronic form as agreed or, where there is no agreement, as is customary.
Article A2Delivery
The seller must deliver the goods either by placing them on board the vessel or by procuring goods already so delivered. In either case, the seller must deliver the goods on the agreed date or within the agreed period, in the manner customary at the port.
The "or by procuring goods already so delivered" clause refers to string sales, which are common in maritime commodity trade.
Article A3Transfer of risks
The seller bears all risks of loss of or damage to the goods until they have been delivered in accordance with A2 (placed on board the vessel), with the exception of loss or damage in the circumstances described in B3.
Article A4Carriage
The seller must contract or procure a contract for the carriage of the goods from the agreed port of shipment to the named port of destination.
The contract of carriage must be made on usual terms at the seller's expense and provide for carriage by the usual route in a vessel of the type normally used for the transport of the type of goods sold.
Article A5Insurance
The seller must obtain at its own expense cargo insurance complying with Institute Cargo Clauses (C) (LMA/IUA) or similar clauses. The insurance shall be contracted with underwriters or an insurance company of good repute.
The insurance must entitle the buyer, or any other person having an insurable interest in the goods, to claim directly from the insurer.
At the buyer's request, the seller must, subject to the buyer providing any necessary information, obtain at the buyer's expense any additional coverage available, such as cover under the Institute War Clauses and/or Institute Strikes Clauses (LMA/IUA), if such coverage is obtainable.
The insurance shall cover, at a minimum, the contract price plus 10% (i.e. 110%) and shall be in the currency of the contract.
The insurance shall cover the goods from the point of delivery (A2 - on board the vessel) to at least the named port of destination.
The seller must provide the buyer with the insurance policy or certificate or other evidence of insurance cover.
The seller must also provide the buyer, at the buyer's request, risk and expense, with the information that the buyer needs for procuring any additional insurance.
Article A6Delivery / transport document
The seller must provide the buyer, at its own expense, with the usual transport document for the agreed port of destination.
This transport document must cover the contract goods, be dated within the agreed period of shipment, enable the buyer to claim the goods from the carrier at the named port of destination, and enable the buyer to sell the goods in transit by the transfer of the document to a subsequent buyer or by notification to the carrier.
When such a transport document (typically a bill of lading) is issued in negotiable form and in several originals, a full set of originals must be presented to the buyer.
Article A7Export / import clearance
a) Export clearance: where applicable, the seller must carry out and pay for all export clearance formalities required by the country of export, such as:
export licence;
security clearance for export;
pre-shipment inspection;
any other official authorization.
b) Assistance with import clearance: where applicable, the seller must assist the buyer, at the buyer's request, risk and expense, in obtaining any documents and/or information relating to transit/import clearance formalities, including security requirements and pre-shipment inspection, required in any country of transit or in the country of import.
Article A8Checking / packaging / marking
The seller must pay the costs of those checking operations (such as checking quality, measuring, weighing, counting) that are necessary for the purpose of delivering the goods in accordance with A2.
The seller must, at its own expense, package the goods, unless it is usual for the particular trade to transport the type of goods sold unpackaged. The seller must package and mark the goods in a manner appropriate for their transport, unless the parties have agreed on specific packaging or marking requirements.
Article A9Allocation of costs
The seller must pay:
a) All costs relating to the goods until they have been delivered in accordance with A2, other than those payable by the buyer (B9).
b) Freight, loading charges and transport-related security costs resulting from A4.
c) The costs of insurance resulting from A5.
d) Unloading costs at the port of destination, but only if those costs are for the seller's account under the contract of carriage.
e) Transit costs that are for the seller's account under the contract of carriage.
f) The cost of providing the usual proof (A6) that the goods have been delivered.
g) Where applicable, duties, taxes and any other costs related to export clearance (A7a).
h) Reimbursement to the buyer of all costs and charges incurred in providing assistance in obtaining documents and information in accordance with B7(a).
Article A10Notices
The seller must notify the buyer that the goods have been delivered in accordance with A2 (placed on board the vessel).
The seller must give the buyer any notice needed to allow the buyer to receive the goods at the port of destination.
Detailed buyer obligations (B1-B10)
Article B1General obligations
The buyer must pay the price of the goods as provided in the contract of sale.
Any document to be provided by the buyer may be in paper or electronic form as agreed or, where there is no agreement, as is customary.
Article B2Taking delivery
The buyer must take delivery of the goods when they have been delivered in accordance with A2 and receive them from the carrier at the named port of destination.
Article B3Transfer of risks
The buyer bears all risks of loss of or damage to the goods from the time they have been delivered in accordance with A2 (placed on board the vessel at the port of shipment).
If the buyer fails to give notice in accordance with B10, the buyer bears all risks of loss of or damage to the goods from the agreed date or the expiry date of the agreed period for shipment, provided that the goods have been clearly identified as the contract goods.
Article B4Carriage
The buyer has no obligation to the seller to make a contract of carriage.
Article B5Insurance
The buyer has no obligation to the seller to make a contract of insurance. However, the buyer must provide the seller, upon request, with any information necessary to enable the seller to procure any additional insurance requested by the buyer in accordance with A5.
Article B6Delivery / transport document
The buyer must accept the transport document provided in accordance with A6 if it is in conformity with the contract.
Article B7Export / import clearance
a) Assistance with export clearance: where applicable, the buyer must assist the seller, at the seller's request, risk and expense, in obtaining any documents and/or information relating to export clearance formalities, including security requirements and pre-shipment inspection, required in the country of export.
b) Import clearance: where applicable, the buyer must carry out and pay for all formalities required by any country of transit and the country of import, such as:
import licence and any licence required for transit;
security clearance for import and any transit;
pre-shipment inspection;
any other official authorization.
Article B8Checking / packaging / marking
The buyer has no obligation to the seller.
Article B9Allocation of costs
The buyer must pay:
a) All costs relating to the goods from the time they have been delivered in accordance with A2, other than those payable by the seller (A9).
b) Transit costs, unless those costs were for the seller's account under the contract of carriage.
c) Unloading costs, including lighterage and wharfage charges, unless those costs were for the seller's account under the contract of carriage.
d) The costs of any additional insurance procured at the buyer's request in accordance with A5 and B5.
e) Reimbursement to the seller of all costs and charges incurred in providing assistance in obtaining documents and information in accordance with A5 and A7(b).
f) Where applicable, duties, taxes and any other costs related to transit or import clearance (B7b).
g) Any additional costs incurred if the buyer fails to give notice in accordance with B10, from the agreed date or the expiry date of the agreed period for shipment, provided that the goods have been clearly identified as the contract goods.
Article B10Notices
The buyer must, whenever it is agreed that the buyer has the right to determine the time of shipment and/or the point of receiving the goods at the named port of destination, give the seller sufficient notice thereof.
CIF vs CFR comparison
Critère
CIF
CFR
Insurance
Seller procures (Clauses C - minimum coverage)
No obligation
Carriage
Seller arranges and pays freight
Seller arranges and pays freight
Transfer of risks
On board vessel (port of shipment)
On board vessel (port of shipment)
Cost for the seller
Freight + export + insurance
Freight + export
Buyer protection
Covered by seller's insurance (Clauses C)
Must procure own insurance
Critère
CIF
CIP
Mode of transport
Sea transport only
All modes (including multimodal)
Insurance level
Clauses (C) - minimum coverage
Clauses (A) - all risks
Transfer of risks
On board vessel at port of shipment
To first carrier
Typical use
Bulk maritime, commodities
Containers, multimodal, air freight
Transport document
Bill of lading
Any transport document
Impact on customs value
Incoterm CIF belongs to group CPT. This group determines which adjustments (AK/BA) are applied to the invoiced price to calculate customs value.
Maritime bulk and commodity trade: CIF is the traditional Incoterm for oil, grain, ore, etc. The "or procure" clause is essential for string sales.
When CIF customs value is required: in the EU, customs value is based on CIF value. Using CIF simplifies customs declarations because the transaction price corresponds directly to the duty base.
When the seller has better freight and insurance rates: the seller may obtain better rates due to their volume of maritime shipments.
When the buyer wants basic insurance coverage: CIF guarantees a minimum of coverage (Clauses C, 110%) without the buyer having to arrange it.
When to avoid CIF
Container shipments: goods are often delivered to the terminal well before loading on board. Use CIP, which transfers risk to the first carrier.
Multimodal transport: CIF is exclusively maritime. For any other mode, use CIP.
If the buyer wants "all risks" coverage: CIF only requires Clauses (C). Negotiate Clauses (A) in the contract, use CIP, or take out additional insurance.
If the destination country requires local insurance: use CFR and let the buyer insure locally.
Recommended contractual clauses
Two distinct ports: clearly specify the port of shipment (risk transfer) and the port of destination (end of seller's cost obligations).
Insurance level: if Clauses (C) are insufficient, explicitly agree on Clauses (A) or (B) in the contract.
Additional insurance: specify whether War or Strikes coverage is required.
Bill of lading: require a full set of original bills of lading to enable resale in transit.
Unloading costs: clarify whether unloading costs at the port of destination are included in the freight.
Analysis by profile
Advantages
Obligations limitées, l'acheteur n'est pas en charge du pré-acheminement et transport principal.
Disadvantages
Ne choisit pas le transporteur mais en supporte les risques.
Recommendations
Si transporteurs multiples, bien préciser où intervient le transfert du risque du vendeur à l'acheteur.
Attention, il convient de distinguer précisément le lieu de livraison (= transfert des risques) du lieu de destination (= répartition des coûts).
S'assurer de la qualité de couverture de l'assurance souscrite par le vendeur.
Si l'acheteur a des couvertures d'assurance intéressantes, l'Incoterm CFR est à privilégier.
Important : Transport insurance is recommended for this Incoterm.
Comparative analysis (radar)
CIF
Compare with
Common mistakes
1
Believing the seller is responsible until the port of destination: under CIF, risk transfers on board the vessel at the port of shipment, not at destination.
2
Accepting Clauses (C) for fragile or high-value goods: Clauses (C) offer minimum coverage and do not cover theft, breakage or handling damage.
3
Using CIF for containerized goods: the moment of risk transfer (on board the vessel) does not correspond to the reality of containerized transport. Use CIP instead.
4
Not requiring delivery of the insurance policy or certificate, preventing the buyer from claiming directly from the insurer in case of loss.
5
Ignoring local insurance requirements in the destination country, potentially rendering the seller's insurance ineffective.
CIF 2020: Freight + ICC C Insurance - Maritime Only - The Trade Hub