Sometimes, international shipping just simply doesn't go according to plan.
In fact, it’s quite common for damage to occur when you’re using multiple modes of transportation to ship goods halfway across the globe. Shippers moving freight from the US to international ports have a few different insurance options available to them for this reason; FOR which means Free On Board, or Cost Insurance of Freight (CIF).
While both systems are designed to protect the shipper, there are many questions about CIF agreements that often go unanswered. However, understanding the basics of a CIF agreement, how it works, what it covers and what you should do before shipping with a CIF, is really not all that difficult.
In this blog post, we’ll give you some of the best tips that any shipper considering CIF can and should follow.
What is Cost Insurance and Freight (CIF)?
CIF stands for Cost Insurance and Freight. In shipping terms it is summed up as such:
“the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.”
In layman’s terms, this basically just means that the quoted or invoiced price provided by the seller includes insurance. This insurance covers the freight all the way to the port it is destined for. After the shipment has arrived at its destination port, the shipper will be required to retain additional insurance to protect the freight until it arrives to the final recipient.
It's common for shippers with large volume international shipments to opt for CIF agreements. It permits a hands-off approach to importing goods but typically comes with the trade-off of a higher premium. It’s a simplified insurance program, which again – is best suited to shippers that don’t want to deal with complex international insurance programs.
How to Prepare for a CIF Shipment
The CIF agreement is regulated under the Uniform Commercial Code when an invoice is marked CIF destination. In this instance, the seller is securing insurance for the buyer during international transportation. If you’re going to opt for this type of insurance protection, there are three items you should consider, that will help reduce errors, and ensure everything is documented correctly.
Understand the Sellers Requirements
Having a complete understanding of the CIF agreement is crucial for any seller – or even the buyer. This includes completing due diligence on which form of currency is provided to the buyer, the complete terms when it expires, and at what point during transit, a secondary insurance plan must be activated.
Prepare the Invoice Correctly
International paperwork involves several steps that must be followed to ensure a smooth and delay-free movement. This is just as crucial with international insurance programs such as CIF agreements. The most important item to remember is to include the term “CIF” along with the details of the destination port. This is typically disclosed in the freight terms section of the invoice.
CIF terms can and usually do vary based on the company offering the insurance, the country or port of destination, the type of commodity shipped, and other specific details. It’s also critical to understand how duty charges factor into the overall cost. Again, all of this will vary based on the individual port of delivery.
Consult with a Professional 3PL
The CIF agreement is quite complex, requires multiple layers of paperwork to be completed, and can be daunting for new shippers. One of the best resources available to new or seasoned shippers opting for CIF protection on international shipping is a professional third-party logistics company like Redwood Logistics.
A professional 3PL that deals with US and international trade such as Redwood Logistics has years of experience working with clients small and large that move freight across the globe daily. They are staffed by international shipping and insurance specialists, who stay on top of evolving tariffs, duties, and shipping regulations. This experience ensures that every CIF filed by the 3PL on behalf of their clients is mistake-free and can be expedited by reliable insurance providers if damage occurs while in transit.
Additionally, they can help you retain insurance from the port to the final delivery that is affordable yet protects your valuable assets. If you’d like to learn more about CIF agreements, and how 3PL’s can help you reduce errors, contact Redwood Logistics.