Cost, Insurance and Freight
Cost, insurance and freight (CIF) is an Incoterms rule for sea and inland waterway transport in which the seller pays freight and minimum insurance to the destination port, while risk passes to the buyer once goods are loaded at origin.
Why it matters for ecommerce brands
CIF looks convenient because the supplier arranges freight and insurance, but you give up control over carrier, schedule, and cost while carrying the risk from the moment goods are loaded at origin. Suppliers may add margin to the freight they buy, and minimum CIF insurance covers only basic perils. For example, on a $50,000 CIF invoice that includes $4,000 of freight and $200 of insurance, the US customs value is $45,800, so at 10% duty you pay $4,580 rather than $5,000. Show freight and insurance separately on the invoice to claim that deduction.
Origin
Cost, insurance and freight was one of the six trade terms in the first Incoterms, published by the International Chamber of Commerce in 1936 for goods shipped by sea.
Common questions
- Is the US customs value based on CIF or FOB?
- The US generally appraises imports on transaction value excluding international freight and insurance, which is close to an FOB basis. If the invoice is CIF, those charges are deducted when they are shown separately.
- What is the difference between CIF and CIP?
- CIF is only for sea and inland waterway transport, and the seller must buy minimum insurance under Institute Cargo Clauses (C). CIP works for any transport mode, including containers and air, and under Incoterms 2020 requires broader all risks cover under Institute Cargo Clauses (A).
- How much insurance does the seller buy under CIF?
- At least 110% of the contract price, at the minimum level of cover under Institute Cargo Clauses (C) or similar. Buyers who want broader cover should agree on it in the sales contract or buy their own policy.