If you're shipping products overseas or importing to the United States, you're faced with a flurry of industry jargon that can get really confusing really quickly. But knowing these terms will likely prove quite valuable to you, so you are getting the best relative prices while meeting the demands and resources of your organization.
This is a term that we use and see quite a bit, so let me help you understand a little more about the acronymn itself and why exactly it exists, so you can identify whether it's right for you.
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Cost Insurance & Freight:
Broken down into its acronymn form, CIF stands for "Cost Insurance & Freight." This means as a buyer, when you look at the fees being charged to you by the manufacturer/supplier, you know the price quoted will get your purchase out of their door, to the port, on the ship, and across the ocean. Once it arrives to your port, you assume control and pay whatever expenses are necessary to get it from the port to your final destination. (Reference)
Unlike C&F, CIF ALSO includes insurance costs.
FOB (free on board), a term I wrote about last week, is another commonly used term, and will often take place when CIF or C&F are not in use. In this scenario, the buyer assumes responsibility of the freight the moment it enters the ship. CIF or C&F terms reflect the freight prepaid to the destination port / airport. The factory to origin port charges can be negotiated between the shippers and consignees to either reflect FOB departure port or ex-factory as well. (more on FOB shipping here: www.etcinternational.com)
When does it make sense to ship CIF rather than FOB? I thought you'd never ask!
We have a long-time customer that designs, manufactures, and distributes specialty water treatment plants all over the globe. Over the years, ETC International Freight System has shipped for them using special equipment, such as flat racks (ocean containers without walls or ceilings for oversize shipments) as well as full container loads (20 & 40’, 45’).
Because of the specialized nature of their industrial products, our client preferred to include shipping and insurance as part of their pricing structure, so they could maintain control over the freight until it reached their buyer's ports. It was important to maintain control because they and their preferred freight forwarders had developed a system that minimizes problems.
Their large plant is far inland from the departure port & they chose to sell on a CIF basis to their overseas customers. Therefore, for them to complete a proposal to their prospective buyers, they requested a CIF pricing from ETC International Freight System to encompass the inland freight, positioning the 3 containers booked together for the same vessel and ocean freight up to the destination port. With this Freight scenario, we priced each phase to arrive to a CIF grand total:
To execute the export declaration, the shipper provides the following documents:
The international shipping company provides a bill of lading draft giving the shipper the means to double check all shipping information, including the CIF incoterms. Once the draft is confirmed to the forwarding company, the original bill of lading or Telex release at destination is issued based on the approved draft. The CIF term does not pertain to the sales terms between vendors and their buyers.
CONCLUSION:
Knowing these freight freight terms will help you find the right path when it comes to your shipments, so you can maximize your investment while minimizing risks and unnecessary headaches. It is important to note that any customs inspection, storage, whether, in the USA or overseas would add to the cost & cannot be identified in advance by your international forwarders.
Interested in learning more? Get a free quote from ETC International Freight System today, and speak to one of our experienced freight forwarder specialists!
And don't forget to download this handy conversion calculator: