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What Is The Meaning Of The Term CIF Or C&F And What Is It Used For?

What is the meaning of the term CIF or C&F? And what is it used for? In some commercial transactions, we may find a commercial method that has advantages and disadvantages for one of the parties to the agreement, whether the exporter or the importer, and some commercial agreements may find one method more suitable for both parties, so through the money makers website, we will address the answer to the meaning of the term CIF or C&F with something detail.

What is the meaning of the term CIF or C&F

It is a common method of shipping used by both the seller and the buyer in the import and export operations, and it is a commercial term of the most important known commercial terms, as it determines when the responsibility of the goods is transferred from the seller and the buyer to know their rights and obligations.

It is the international trade terms for shipping, which means (cost, insurance, shipping agreement), in which the seller bears responsibility for all three, and accordingly, the seller is responsible for exporting and shipping the goods until they reach the port of destination, with the goods insured throughout the journey.

Means the costs and freight or sale with a commitment to the expenses of the goods and the freight required to bring the goods to the buyer at the port of destination specified in this sale.

For example: Small businesses may prefer the larger party to take responsibility, as this can lead to lower costs, and some businesses also have special access through customs, documentation of freight charges when taxes, and other needs that require a specific shipping agreement.

  • CIF

The price here includes the expenses, shipping cost and insurance.

It is an abbreviation of Cost-Insurance-Fright, and it means that the one who will ship the goods is the one who will bear all the costs of the goods, as well as insuring them and shipping expenses until the goods are ready for delivery at the port of the importer.

They are expenses paid by the seller to cover the costs, insurance and shipping of the buyer's order during its transportation, so the goods are exported to a port mentioned in the sales contract, until the goods are fully loaded on the transport ship, and the seller bears the costs of any loss or damage to the product.

Furthermore, if the product requires additional customs duties, export paperwork, or even inspections and re-routing, the seller must cover these expenses.

It applies only to sea or waterway shipments, not to other forms of shipping, and is commonly used when shipping containers or less container loads.

For those new to importing, CIF may be used; Because it allows them to understand the import process before they need to understand the export process.

CIF cannot be used for small parcel shipments, nor for air shipment, it is only used for ocean shipments, it does not matter the size of the parcel nor the type of container in which the goods are shipped.

  • C&F

The price here includes only the cost and shipping charges.

It is an abbreviation of Cost - Fright, which means that the supplier will bear the costs of the goods and the costs of shipping them, but the importer will bear the costs of insurance on the goods.

Source Obligations

Exporters usually use this method for those who do not have direct access to ships, under its terms the seller is responsible for the specific protection of an order, and speaking of what the term CIF or C&F means when the seller quotes this method of shipment, he agrees to bear the full burden of export The goods are shipped until they reach the ship.

The seller has responsibilities that go beyond simply ensuring that the shipment is placed on a container ship. His responsibilities are as follows:

  • The supply of the goods is in conformity with the contract, with the submission of evidence of such conformity whenever the contract of sale so requires.
  • He contracts, at his own expense, according to the usual conditions, to transport the goods being sold to the agreed port of destination according to the usual route on a ship engaged in outward navigation, and not a sailing ship, i.e. of the type normally used in the transport of goods similar to the goods agreed upon in the contract.
  • Pays the freight and any other expenses required for unloading the goods at the port of discharge which are usually collected by the liner at the time of shipment at the port of shipment.
  • The seller shall, under his responsibility and expense, obtain the export license or any other government permission required for the export of the goods.
  • Shipment of the goods at his expense on board the ship at the port of shipment and on the date or within the specified period. If no date or deadline is specified for that, the shipment shall take place within the reasonable period provided that the buyer is notified of this without delay that the goods have been shipped on board the transporting ship.
  • The seller bears all risks of the goods until the moment they actually cross the ship's rail at the port of shipment.
  • The seller shall provide the buyer with a clean bill of lading, free of reservations and negotiable, for the agreed port of destination, as well as the invoice for the shipped goods, and the bill of lading must cover the goods under contract.
  • The seller bears all duties and taxes due on the goods until they are fully shipped, including any taxes due to export.
  • The seller shall provide the buyer with the source certificate, and the buyer shall bear the consular fees for this.
  • To provide the buyer, at the request of the latter and under his responsibility, all assistance in obtaining any documents that are released in the country of shipment, or in the country of source, which the buyer may request to import the goods in the country of arrival.

Fee borne by the seller

Based on the foregoing, the seller's obligations when he uses the CIF method of shipping to bear a set of fees, namely:

  • Loading fee: related to the loading of the shipment on the first carrier from the seller's warehouse.
  • Port Delivery Fee: It includes all transportation costs of the goods from the seller's warehouse.
  • Origin terminal fee: It is a fee for delivery at the port of loading.
  • Tax and customs clearance fees: Any customs costs associated with exporting goods.

Importer's obligations

Continuing to answer the question of what is the meaning of the term CIF or C&F, we point out that CIF is a traditional way of shipping goods to importers, which is similar to free shipping on board, with the basic difference that the party responsible for the expenses up to the point of loading the product on board the ship.

Accepting the documents submitted by the seller to him if they are identical to what was agreed upon in the sale contract, and he must pay the price agreed upon in the contract.

Receipt of the goods at the agreed port of destination with bearing all expenses related to the goods during their transportation during the sea voyage, except for the freight, which is on the seller.

Bear the expenses of unloading the goods, including the fees for using the port of destination, unless these expenses are included in the freight or collected by the shipping company when paying the freight.

You bear all the risks of the cargo from the time it actually crosses the carrier's rail at the port of shipment.

In the event that the buyer reserves the right to set a time limit during which the goods will be shipped or the right to choose the port of arrival, and fails to issue instructions in this regard to the seller in a timely manner, he shall bear all additional expenses incurred by the goods.

The buyer is obligated to pay all costs of obtaining the source's certificate and consular documents, as well as the costs of obtaining the documents referred to in the clause of the seller's obligations.

It is the buyer's responsibility to obtain a permit to import the goods or something similar that may be required for the import of the goods in the country of destination.

Fees borne by the buyer

The buyer is responsible for all customs duties and any other fees or taxes paid at the time of importing the goods, and we classify them as:

  • Destination station or destination handling charges, which are all costs associated with unloading to transport goods within a station.
  • Delivery to destination: concerned with organizing logistics services for transporting goods from the port to the final destination.
  • Unloading at destination: Once the shipment reaches the delivery destination, the buyer pays any costs associated with unloading the cargo to the truck.
  • Import duties, taxes and customs clearance.

Why use CIF ?

Each term has different advantages and terms, and many importers prefer CIF method, on the other hand they prefer FOB method as well.

If you are a buyer, you may choose to use CIF due to convenience, you do not have to deal with any risks, demands or concerns regarding shipping in transit.

Many importers will also use CIF if they are shipping a small batch of goods; Because the cost of insuring small volumes may actually be higher than the fees charged by sellers.

Sellers may prefer CIF shipping as the idea of ​​having higher margins, ownership of the goods in transit puts additional risks on sellers.

Some traders seek to maximize their profits by buying FOB and selling CIF, as FOB is one of the means used in the import and export movement that results in the buyer taking all responsibility for the goods shipped.

CIF differs from FOB in that it takes responsibility for the goods on the move. In some cases, the goods are not deemed to have been delivered until they are in the buyer's possession, and in other cases, the goods are deemed to have been delivered and are the responsibility of the buyer once they reach the port of destination.

A country that wants to encourage its merchant fleet must buy and import FOB and export and sell CIF.

Why don't I use CIF ?

Basically the buyer pays a premium for convenience. In addition, the buyer gives up control of the shipment. If an error occurs in the CIF shipment, buyers will have more difficulty in obtaining accurate shipment information; Because they don't technically own the goods.

The buyer then has to rely on the seller to provide the importer’s security deposit document, and if the buyers provide this delay, there are fines and penalties, and this dependence on the seller can put the buyer in a weak position.

Also, anytime a buyer relies on the seller to manage any aspect of the shipping process, they risk inflated prices, and in some countries this can inflate shipping costs.

The CIF option is a more expensive option when purchasing merchandise; Because the seller uses the shipping agent of his choice, he may charge the buyer more money in order to increase the profit of the transaction, and the communication is also a problem; Because the buyer depends only on the people who act on behalf of the seller.

Also, the buyer may still have to pay additional charges at the port, such as docking and customs clearance fees, before the goods are cleared.