CIF (Cost, Insurance and Freight)

CIF is a 'C-rule', and C-rules have a distinctive feature: the point where the seller stops paying and the point where the seller stops bearing risk are different. Under CIF the seller pays the ocean freight all the way to the named destination port, and must also buy marine insurance covering the voyage. So on cost, the seller's responsibility runs to the destination port.

On risk, however, CIF behaves like FOB. Risk of loss or damage passes to the buyer the moment the goods are loaded on board the vessel at the port of shipment. This means that during the sea voyage — which the seller is paying for — it is actually the buyer who bears the risk. The insurance the seller is required to buy is there precisely to protect the buyer during that gap.

Once the goods reach the destination port, the buyer takes over completely: unloading, import customs clearance, duties and import VAT are all the buyer's responsibility.

Under Incoterms 2020, CIF only obliges the seller to buy minimum-level insurance — Institute Cargo Clauses (C), which covers a limited set of named perils. This is a deliberately low bar. For high-value or fragile goods, Clauses (C) cover may be inadequate, leaving the buyer exposed if something goes wrong on a leg where the buyer already bears the risk.

This is a key difference from CIP, the multimodal sibling of CIF. In Incoterms 2020 the ICC raised CIP's insurance requirement to the comprehensive Institute Cargo Clauses (A), but left CIF at the minimum Clauses (C). Buyers who want fuller protection under CIF should either negotiate a higher level of cover with the seller or arrange their own top-up insurance.