Characteristics of Cost, insurance and freight (CIF)
Here are some distinctive characteristics of CIF:
1. Costs Inclusion: CIF necessitates the seller to cover the costs of the products, insurance, and freight (transportation) to the agreed-upon destination port. It means that the seller is liable for transporting and insuring the products until they reach the destination port.
2. Insurance Coverage: In CIF transactions, it is the seller’s responsibility to obtain insurance coverage for the shipped products. Typically, the insurance covers risks like loss or damage to the products during transit.
3. Transfer of Risk: Once the products have been loaded onto the vessel at the port of origin, the risk of loss or damage typically transfers from the vendor to the purchaser. This indicates that the buyer is typically responsible for submitting an insurance claim if the products are damaged or lost during ocean transport.
4. Port of Destination: The seller is liable until the products are discharged at the port of destination specified in the contract. To avoid confusion, it is essential to specify the destination port in the sales contract.
5. Title Transfer: When goods are loaded onto the vessel at the port of origin, ownership and title are typically transferred from the seller to the buyer. However, this may vary depending on the sales contract and local laws.
6. Seller’s Obligations: In CIF transactions, the seller is responsible for delivering the products to the port of destination, arranging and paying for ocean freight, providing insurance coverage, and managing export customs clearance.
7. Buyer’s Obligations: Once the products arrive at the destination port, the customer is responsible for import customs clearance, duties, and taxes.
8. Documentation: CIF transactions require numerous kinds of documentation, such as commercial invoices, bills of lading (or other transport documents), insurance certificates or policies, and any other documents necessary for customs clearance and payment.
9. Risk Allocation: CIF transfers the majority of the risk associated with transportation, insurance, and customs clearance to the customer. The potential risks and costs associated with these responsibilities should be made known to buyers.
10. Suitability: CIF has become popular for goods transported by sea because it was intended especially for ocean freight. It may not be suitable for other modes of transportation, including the air or land.
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