CIF: what cost, insurance and freight means on a quote

Where CIF sits in Incoterms 2020

Incoterms 2020 has 11 rules^[2], and 4 of the 11 rules^[3] are for sea and inland waterway transport. CIF is one of them: the rule is to be used only for sea or inland waterway transport^[1]. A factory that quotes CIF is quoting a price that already includes the ocean leg to your destination port.

Who pays for what, and who carries the risk

The split is the part buyers miss. The seller pays for the voyage, but the risk moves to you once the goods are on board the vessel^[1]. If a carton is crushed at sea, the loss falls on you, so the insurance terms below matter.

The insurance is a minimum

Unless the contract or the custom of the trade says otherwise, the seller only has to buy cover that complies with Clauses (C) of the Institute Cargo Clauses^[1], for at least 110% of the contract price^[1]. If your goods are fragile or high value, agree wider cover in writing before you pay a deposit, or insure the shipment yourself.

When CIF is the wrong rule

The International Chamber of Commerce, which publishes the rules, says that where more than one mode of transport is used, which is common when goods are handed to a carrier at a container terminal, the rule to use is CIP rather than CIF^[1]. If your order ships in a container, ask the seller to quote CIP instead, so the point where risk passes matches the point where the factory hands over the goods.

How CIF affects your landed cost

For goods entering the United States, the value that duty is charged on excludes the cost of international freight and insurance^[4]. So the CIF price is not your dutiable value: the freight and insurance inside it come off first, and you need the seller to show them as separate lines. The European Union works the other way: its customs value includes transport and insurance up to the EU border^[5].

Line	Amount
CIF Los Angeles price, 2,000 units at $4.60	$9,200
Ocean freight included in that price	$700
Insurance included in that price	$30
Value for US duty (price minus freight and insurance)	$8,470
Duty at 10% (assumed)	$847
Port, customs fees, broker and delivery charges at destination	$520
Landed cost	$10,567
Landed cost per unit	$5.28

Illustrative figures, not a quote. Real prices depend on the spec, quantity and factory.

When one factory quotes CIF and another quotes a different rule, compare them on the landed cost to your warehouse, not on the unit price. Each quote we send states its shipping terms, so you can see which costs are inside the price and which are yours.