International Commercial Term - CIF (Cost, Insurance, Freight)

Incoterms, are internationally recognized trade rules published by the International Chamber of Commerce (ICC). They define the responsibilities of buyers (importers) and sellers (exporters) when goods are transported from one country to another. It is also know as Invoice terms.

CIF- COST, INSURANCE, FREIGHT

In CIF term, the exporter is responsible for packaging costs, export customs clearance, transportation costs, and international marine insurance. The exporter must arrange and pay for freight to the agreed destination port in the importer’s country and obtain insurance coverage as required under CIF rules.

However, the risk transfers from the exporter to the importer once the goods are loaded on board the vessel at the port of shipment. The insurance provides coverage against the risks specified in the insurance policy. The insurance company does not automatically assume ownership or responsibility for the goods.

Example,

Exporter : Universal Swords
Importer : A USA-based company
Product : Ceremonial Swords
Order Quantity : 100 Pieces
Price Per Piece : $ 100
FOB Value : $ 10,000
Insurance Charges : $ 50
Forwarding Charges : $ 950
Invoice Value : $ 11,000
Invoice Term : CIF - Chicago (USA)

Under this arrangement, the exporter is responsible for preparing and packing the goods, arranging and paying for domestic and international transportation, obtaining international marine insurance, and completing export customs clearance formalities in India.

Once the goods are loaded on board the vessel at the port of shipment, the risk transfers from the exporter to the importer, even though the exporter continues to pay the freight and insurance costs to the agreed destination port.

Upon arrival at the destination port, the importer is responsible for import customs clearance, payment of applicable duties and taxes, and onward delivery of the goods to the final destination. Once the goods have reached at the destination port the importer is responsible for import customs clearance, pay applicable duties, and onward delivery.

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