Lesson 11 / 11 · sea and inland waterway only
CIF Cost, Insurance and Freight
Like CFR — seller loads, pays freight to the named port, risk passes on loading — plus the seller buys marine insurance for the buyer. By default only minimum cover is required.
Reviewed by: pending — expert review by TermVisa's editor (retired VP, international transport) in progress · Last updated
Scenario
Pulp bales shipped break-bulk from Santos to Livorno (sea, break-bulk)
CIF Livorno Incoterms® 2020
- Seller
- Pulp producer, São Paulo state, Brazil
- Buyer
- Tissue-paper mill, Lucca, Italy
- Transport
- Sea — break-bulk pulp bales, Santos → Livorno
The seller, a pulp producer in São Paulo state, Brazil, sells 6,000 tonnes of bleached pulp in bales to the buyer, a tissue-paper mill in Lucca, Italy, under CIF Livorno Incoterms® 2020. Transport is by sea, break-bulk: the seller books space on a specialised pulp vessel from Santos, pays the freight to Livorno and buys marine insurance. The buyer clears the pulp at Livorno and trucks it to the mill.
Illustrative scenario: companies are generic, and real contracts, carriers and countries add their own conditions.
The journey, stage by stage
Top bar: who pays for each stage. Bottom bar: who bears the risk of loss or damage. The red line marks where risk passes.
- Seller
- Buyer
- Depends on contract / carrier or port practice
- Point where risk passes
⚠ Risk passes on loading at Santos; the seller-bought policy then protects the buyer.
- Pre-carriage to the departure terminal — Seller: Mill to the Santos pulp terminal
- Export clearance — Seller: Brazilian export formalities
- Departure terminal handling and loading — Seller: Terminal handling at Santos
- Lifting the cargo on board — Seller: Loading on board
- Main carriage — Seller: Sea freight Santos → Livorno + insurance
- Arrival terminal: unloading and handling — Depends: Discharge at Livorno: per freight terms
- Import clearance, duties and taxes — Buyer: EU import clearance and import VAT
- On-carriage to the named place — Buyer: Truck to the mill in Lucca
Who does what in this scenario
| Party | What they arrange / do | Who pays (them / what they pay) | Risk they carry | Key documents |
|---|---|---|---|---|
| Seller / exporter | Books the vessel, loads, pays freight and minimum insurance, sends documents. | To Livorno: freight and insurance premium; loading. | Until on board at Santos. | Commercial invoice, bill of lading, insurance certificate, packing list. |
| Buyer / importer | Claims under the policy if needed, clears, receives. | Discharge (per terms), duties, import VAT, delivery; extra cover if wanted. | From on board at Santos. | Bill of lading, insurance certificate, import declaration. |
| Origin freight forwarder | Seller's agent in Santos. | Seller. | Its own errors. | Booking. |
| Destination freight forwarder | Buyer's agent in Livorno. | Buyer. | Its own errors. | Delivery order. |
| Ocean carrier (shipping line) | Carries the bales Santos → Livorno. | Seller. | Per bill of lading. | Bill of lading. |
| Cargo insurer | Under CIF the default is minimum cover (comparable to Institute Cargo Clauses (C)), at least contract value + 10%, in the contract currency, with the buyer able to claim. Parties may agree broader cover — often wise. | Seller. | Named perils only, by default. | Insurance certificate. |
| Customs broker (export) | Files the export declaration in Brazil for the seller. Most countries require one; value thresholds, exceptions and export-control checks vary — ask the broker. | Seller. | Answers to its client for filing errors; the exporter stays responsible to customs. | Export declaration and release (proof of export). |
| Customs broker (import) | Classifies the goods, files the import declaration in Italy for the buyer as importer, pays duties and import taxes on its account and obtains release. | Buyer. | The buyer remains responsible to customs as importer; the broker answers to it for its own errors. | Import declaration, duty and tax receipts, release. |
| Banks (letters of credit) | CIF is classic for documentary credits: invoice, bills of lading and insurance certificate must match the credit. | As negotiated. | Documentary risk. | Full document set. |
| Terminals and ports | Pulp terminals at Santos and Livorno. | Origin: seller. Destination: per terms. | Its own handling and storage. | Tally reports. |
✗ Common mistakes
- Buyer assuming CIF insurance is 'all risks' — the default is minimum cover (see the case).
- Using CIF for containers handed over at a terminal (CIP fits better).
- Insurance certificate not matching the documentary credit.
- Thinking the seller carries the risk to Livorno.
? What to ask before you sign
- Your cargo insurer (Buyer) What exactly does the seller's policy cover — and should I add my own wider cover?
- The seller (Buyer) Can we agree 'all risks'-type cover in the contract instead of the minimum?
- Your bank (Seller) Which insurance details must the certificate show to meet the credit?
- Your customs broker (Buyer) Is the CIF value the customs value at import here?
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