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What are CIF terms?
CIF stands for cost, insurance and freight. The terms specify the division of responsibility between the shipper/supplier and the consignee/buyer in the process of shipping the cargo from one destination to another.
When a shipment is shipped on CIF terms the shippers/suppliers invoice(commercial invoice) includes the cost of the goods and the freight to send them to a certain destination. The shipper/supplier pays for everything up to and including the freight to a said port, with the first charges to the consignee/buyer being the terminal charges at the arrival port.
What are the Pro’s and Con’s of shipping CIF?
If the consignee/buyer knows exactly what costs they will have to pay on arrival then these terms are fairly straight forward. The shipper/supplier with arrange for the cargo to be shipped without the buyer having to deal with anyone. Once the goods land at destination the suppliers agent will contact the Consignee/buyer and arrange onwards movement of the cargo including clearance and delivery. CIF Terms are used quite successfully when it comes to FCL shipments, this is due to the fact the shipping line can act uniformly which prevents any fluctuations that may occur.
If you are not prepared there can be a lot of panic involved when the cargo arrives at destination. For example:
- There can be hidden charges, that come to light like CISF (China import service fee)
- Costs of certain services may be inflated
- There can be delays and further costs when the goods land if you are not prepared or have not assisted in clearing the cargo through customs in a timely manor
Many first time importers looks to their supplier to organise their first shipment and deliver the cargo to the uk, due to the cost and simplicity of what is promised to them. Unfortunately that is not always the case, as the consignee/buyer is then responsible for paying all of the UK cost in addition to further fees they were not made aware of.