CandleFocus

Cost, Insurance and Freight (CIF)

Candlefocus Editor
Cost, insurance, and freight (CIF) is an agreement between a buyer and seller defining all the costs that are ultimately borne by the buyer. This includes the cost of the goods and the cost of shipping, insurance and other related fees such as customs duties, taxes, and miscellaneous charges. The benefit of cost, insurance and freight (CIF) to the buyer is that it requires the seller to assume responsibility for the cost and risk associated with shipping and delivering the goods from its origin to the destination port. This arrangement allows the buyer to purchase goods from suppliers located in different parts of the world without worrying about the risks, costs and complexity of shipping goods across international boundaries.

Moreover, under cost, insurance, and freight (CIF) arrangements, the seller pays for the cost of the goods, freight, insurance, and other related expenses including taxes and customs duty up to the buyer’s destination port. This helps the buyer to get duty-free goods and the buyer need not pay any additional duties or taxes to the government. The buyer just needs to pay the freight and insurance charges to the seller which can be reduced due to the bulk purchase by the buyer.

In essence, CIF is a convenient and cost-effective way to purchase goods as it reduces the shipping and insurance costs, few customs duties and reduces the risks associated with trading across international boundaries. Most often, CIF is used to purchase large quantities of goods as the seller can spread the additional costs across numerous shipments. It is also a great way for buyers to hasten their goods delivery time as the goods start moving once the cost, insurance and freight have been paid.

Glossary Index