Incoterms
CIF | Cost Insurance and Freight
Incoterms® 2020
When talking about Incoterms, reference is always made to transportation risks and costs. The agreed Incoterm always indicates where and when the costs and risks are transferred from the seller to the buyer.
All Incoterms Build your booth
Main international transportation methods
Air Freight
Recommended transportation method for international purchases or sales requiring a short delivery time
Sea Freight
Recommended transport method for international purchases or sales requiring lower freight rates
Land Freight
Recommended transport method for international/domestic purchases or sales with short to medium transit distances
Rail Freight
Recommended transport method for international purchases or sales requiring large load volumes. Multimodal transport with low accident rate.
Express Freight
Recommended method of transportation for domestic purchases or sales with small cargo volumes.
Air Freight
Recommended transportation method for international purchases or sales requiring a short delivery time
Sea Freight
Recommended transport method for international purchases or sales requiring lower freight rates
Land Freight
Recommended transport method for international/domestic purchases or sales with short to medium transit distances
Rail Freight
Recommended transport method for international purchases or sales requiring large load volumes. Multimodal transport with low accident rate.
Express Freight
Recommended method of transportation for domestic purchases or sales with small cargo volumes.
Before you know...
¿What are the real risks during transport?
UNINTENDED ACCIDENTS
During loading/unloading of goods. During the handling. During transshipment storage (if the goods are to be temporarily stored en route)
NATURE OF THE GOODS
Leaks, explosion of dangerous goods,
oxidation, rust.
HUMAN INTERVENTION
Theft, piracy, accidents due to carrier negligence, faulty handling.
FLAWED GOODS
Previous defects or deficiencies in the goods themselves or in the packaging.
The Seller must ensure that the packaging is adequate to avoid surprises in case of possible incidents.
ACCIDENTS OF TRANSPORTATION
Sea: Shipwreck. Stranded or aground. Approach or intentional collision. Unintentional collision.
Air: aircraft crash.
Road: overturning, collision...
In any means of transport: fire, explosion,...
SOCIAL-POLITICAL
Wars, strikes, revolutions, riots,...
Risks that have in common the concurrence of the collective action of man in the realization of the risk.
UNINTENDED ACCIDENTS
During loading/unloading of goods. During the handling. During transshipment storage (if the goods are to be temporarily stored en route)
NATURE OF THE GOODS
Leaks, explosion of dangerous goods,
oxidation, rust.
HUMAN INTERVENTION
Theft, piracy, accidents due to carrier negligence, faulty handling.
FLAWED GOODS
Previous defects or deficiencies in the goods themselves or in the packaging.
The Seller must ensure that the packaging is adequate to avoid surprises in case of possible incidents.
ACCIDENTS OF TRANSPORTATION
Sea: Shipwreck. Stranded or aground. Approach or intentional collision. Unintentional collision.
Air: aircraft crash.
Road: overturning, collision...
In any means of transport: fire, explosion,...
SOCIAL-POLITICAL
Wars, strikes, revolutions, riots,...
Risks that have in common the concurrence of the collective action of man in the realization of the risk.
¿Should I insure the goods?
Accidents are unpredictable, but as we have
seen, there are certain situations
that increase the risk of accidents.
Carrier coverages
The carrier usually has contracted a policy for the transports it manages, but this policy normally overcovers up to a limit, depending on the rules of each means of transport:
SEA | Haya Visby Rules
666,67 SDR per package, or unit load, or 2 SDR /Kg gross weight. The higher of the two shall apply.
AIR | Montreal Convention
19 SDR /kg gross weight of merchandise lost, damaged or delivered late.
ROAD | CMR Convention
8,33 SDR /kg gross weight for loss and damage and the price of transportation for delays.
Special Drawing Rights ('SDR') is the International Monetary Fund's Unit of Account. It is a basket of currencies that includes the Euro, US Dollar, Japanese Yen and Pound sterling. It is determined daily and published on the IMF's website. Its value can be consulted on the IMF's home page: https://www.imf.org/en/Home
CIF Process
CIF – Cost Insurance and Freight
CIF – place, is an Incoterm for sea or inland waterway transport where the seller loads the goods on the means of transport contracted by him to the port of destination, but the risk of loss or damage is transferred from the seller to the buyer when the goods are loaded on the main transport. In other words, the seller pays for the main carriage to the named place but the risk of such carriage is borne by the buyer. Even so, the seller is obliged to take out insurance on behalf of the buyer.
If the goods are transhipped at a port and change main vessel, it is necessary to determine to which port the seller is responsible, otherwise the seller will only be responsible for the first carriage.
Regarding transport and handling, the seller must bear all the costs of packing and checking the goods correctly, transporting the goods to the port of shipment, loading them on the main vessel and paying the corresponding freight.
The buyer, on the other hand, will assume all the costs of unloading the main transport (where he will have to accept the rate of the carrier contracted by the seller), unless the unloading was agreed to be paid by the seller. Once the goods have been unloaded, the buyer shall bear all import and transport costs to his premises.
At the documentary and customs level, the seller must process all the necessary documentation at origin, both for export and for the subsequent import, assuming the costs of the necessary documentation for export, as well as the customs export formalities and possible fees and taxes.
The buyer assumes the cost and obligation of processing the necessary documentation at destination, as well as the import clearance and the relevant duties.
In any case, there must be an implicit collaboration between buyer and seller so that the documentation and formalities can be carried out without hindrance.
In relation to the insurance of the goods, the seller is obliged to take out insurance for the main carriage and provide the policy to the buyer. Such insurance must have a limited coverage, such as clauses (C) of the Institute's Cargo Clauses (for more information: here) and must insure, at least, 110% of the value and currency stated in the contract.
The buyer has no obligation to the seller. The seller must provide all necessary information to the buyer in the event that the buyer decides to take out additional insurance.
Here is a summary of costs and responsibilities:
Packing
Verification
Control.
Licenses and authorizations.
Other formalities
Loading into truck or
container at factory
or warehouse
Inland
Insurance
Inland transportation country of origin.
(From factory to port/airport terminal or
to carrier)
Customs
formalities
export
Terminal handling costs
at origin
(Port, airport, rail)
Main international transportation
International
insurance
Inland
insurance
Destination terminal handling costs
(Port, Airport)
Customs formalities
import (tariffs, internal and special taxes and formalities).
Import licenses and authorizations
Inland transportation country of destination.
(From port,
airport or terminal to factory or logistics operator)
Unloading
Successful
delivery
Packing
Verification
Control.
Licenses and authorizations.
Other formalities
Loading into truck or
container at factory
or warehouse
Inland
Insurance
Inland transportation country of origin.
(From factory to port/airport terminal or
to carrier)
Customs
formalities
export
Terminal handling costs
at origin
(Port, airport, rail)
Main international transportation
International
insurance
Inland
insurance
Destination terminal handling costs
(Port, Airport)
Customs formalities
import (tariffs, internal and special taxes and formalities).
Import licenses and authorizations
Inland transportation country of destination.
(From port,
airport or terminal to factory or logistics operator)
Unloading
Successful
delivery
Who has the Obligation
Who assumes risk
Who bears the Cost
Origin
Have the goods ready and well packaged within the indicated
time limit
Processing the necessary documentation (commercial documentation, licenses, authorizations ...) for all your export procedures.
Processing the necessary documentation (commercial documentation, licenses, authorizations ...) for all your import procedures.
Loading of goods by truck or container
Inland insurance (from warehouse to main transport)
Inland transport (from the warehouse to the agreed point)
Export customs formalities, including possible duties and taxes.
Handling and loading charges to the main transport
Main Transportation
Main Transportation
International Insurance
Destination
Handling and unloading costs of the main transport
Import licenses and authorizations
Customs Import Formalities
Taxes and fees
Inland Insurance (from main transport to destination warehouse)
Inland transport (from the main transport to the destination warehouse)
Unloading of goods at final destination
Origin
time limit
Main Transportation
Destination
