C.I.F., or "cost, insurance and freight", is a term of the contract of sale of goods being shipped where the seller pays the cost of the insurance and transport of the goods to the destination; legal delivery occurs when the goods cross the ship's rail in the port of shipment.
The purchaser takes actual delivery of the goods at the place named in the contract as the place of destination. The seller's responsibility ends when the goods are safely placed on the ship as from that point on, the risk during ocean transit is covered by the mandatory insurance.
The risk is with the purchaser and his insurance underwriters from the moment transportation begins.
In Ross T Smyth v TD Bailey, Justice (Lord) Wright wrote:
"(A) c.i.f. contract ... is a type of contract which is more widely and more frequently in use than any other contract used for the purposes of sea-borne commerce. An enormous number of transactions, in value amounting to untold sums, are carried out under c.i.f. contracts."
In International Trade Law, the author wrote:
"A CIF contract ... is not a contract that goods shall arrive, but a contract to supply goods that comply with the contract of sale, and to obtain a contract for carriage and contract of insurance."
CIF is a term used mostly in maritime transport with the unique feature of insurance being at the expense of the seller. In this way, CIF is distinguished from 'CFR', which stands for 'costs and freight' only.
The insurance and freight charges are included in the price of the goods. Thus, if a purchaser accepts a sale offer with a price stated to be 'CIF', that means that the price includes "costs, insurance and freight'.
The acronym CIF is promoted by the International Chamber of Commerce as part of a proposed standard list of common international trade acronyms called Incoterms.
REFERENCES:
- Carr, I. and Stone, P., International Trade Law (New York: Routledge Cavendish, 2005), pages 6-7.
- Duhaime.org wishes to thank Mr. Darren Williams, maritime law lawyer of Victoria, British Columbia, for his assistance in regards to this definition.
- International Chamber of Commerce
- Duhaime, Lloyd, Maritime Law - A Glossary
- Johnson v Taylor Bros. 1920 122 LT 130.
- Ross T Smyth v TD Bailey 1940 3 All ER 60