Procurement Glossary
CIF (Cost, Insurance and Freight): Definition and application in Procurement
November 19, 2025
CIF (Cost, Insurance and Freight) is one of the most important Incoterms clauses in international trade and defines the distribution of costs between buyer and seller for sea transportation. This delivery term stipulates that the seller bears the costs, insurance and freight up to the port of destination. For buyers, understanding CIF is crucial for the calculation of procurement costs and the distribution of risk in the supply chain. Find out below what CIF means, how it is applied and which strategic aspects need to be considered.
Key Facts
- CIF applies exclusively to maritime and inland shipping
- Seller bears costs, insurance and freight to the port of destination
- Risk is transferred when the goods are loaded onto the ship at the port of shipment
- Buyer takes over unloading, customs clearance and onward transportation in the country of destination
- Minimum insurance cover corresponds to Institute Cargo Clauses (C)
Contents
Definition and meaning of CIF
CIF stands for "Cost, Insurance and Freight" and is one of the eleven Incoterms clauses that standardize international trade transactions.
Basic features of CIF
In the case of CIF deliveries, the seller assumes comprehensive obligations up to the port of destination. The cost allocation includes:
- Cost of goods and export packaging
- Export customs clearance and fees
- Main transportation by ship to the port of destination
- Transport insurance with minimum cover
CIF vs. other Incoterms
Compared to CFR, CIF also includes transport insurance. In contrast to FOB, the seller also bears the main freight costs with CIF. The decisive difference to DDP is that with CIF, the buyer is responsible for import processing.
Importance of CIF in Procurement
For buyers, CIF offers planning security for transportation costs and reduces logistical complexity. The delivery condition makes it easy to compare prices between different suppliers, as the main transportation costs are already included in the offer price.
Process, control and planning
The successful processing of CIF transactions requires structured processes and clear responsibilities between the trading partners.
Procedure for a CIF delivery
The seller organizes the entire transport to the port of destination and takes out transport insurance. After loading, he hands over the transport documents to the buyer, including the bill of lading and insurance policy. The buyer assumes the transportation risk from this point on, although the costs are already borne by the seller.
Document management
Essential documents include the bill of lading, the commercial invoice and the insurance policy. A complete packing list facilitates subsequent customs clearance. Timely transmission of all documents is crucial for smooth processing.
Control and monitoring
Buyers should continuously monitor the shipping status and prepare for import processing at an early stage. Coordinating with customs agents and preparing the necessary import documents minimizes delays at the port of destination.
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Operational key figures for CIF
Relevant key figures enable the evaluation and optimization of CIF procurement processes.
Cost structure key figures
The share of freight costs in the total price shows the transportation cost efficiency. The insurance cost ratio in relation to the value of the goods assesses the appropriateness of the insurance premiums. Additional import costs (customs duties, fees) complete the total cost of ownership analysis.
Delivery performance indicators
The punctuality rate measures the on-time arrival at the port of destination. Transport time variability indicates planning reliability. The damage rate assesses the quality of transport processing and packaging.
Process efficiency metrics
The document completeness rate reduces delays in customs clearance. The average demurrage time in the port has a significant impact on overall costs. Demurrage costs per shipment show optimization potential in processing.
Risks, dependencies and countermeasures
CIF deliveries involve specific risks that can be minimized by taking appropriate measures.
Transportation risks and insurance gaps
Standard CIF insurance only covers 110% of the value of the goods with minimal risk coverage. Exclusions such as strikes, war or delays can lead to significant losses. Buyers should check additional insurance or agree extended cover.
Quality and delivery risks
The early transfer of risk during loading makes it difficult to enforce quality claims. Transport damage is often difficult to prove and claims settlement is time-consuming. Preventive quality checks before loading and detailed documentation minimize these risks.
Customs and compliance risks
Incorrect or incomplete documents can lead to delays in customs clearance. Changes in customs regulations or customs tariffs affect import costs. Close cooperation with experienced customs brokers and regular compliance checks significantly reduce these risks.
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Practical example
A German mechanical engineering company purchases components from China via CIF Hamburg. The supplier organizes the sea transport and takes out transport insurance. After 18 days by sea, the ship arrives in Hamburg, where the company takes delivery of the goods. Customs clearance is carried out by a customs agent who uses the documents provided by the supplier.
- Seller bears: Cost of goods, export duty, sea freight, basic insurance
- Buyer bears: Import duty, unloading, onward transportation, extended insurance
- Cost transparency: All main transportation costs included in the offer price
Trends & developments at CIF
Digitalization and changing retail structures are having a significant impact on the use of CIF deliveries.
Digital document processing
Electronic bills of lading and digital insurance policies speed up document transfer. Blockchain-based solutions increase transparency and security in the document chain. AI-supported systems automate document verification and reduce manual sources of error.
Sustainability aspects
Environmentally conscious companies are increasingly demanding sustainable transport solutions for CIF deliveries too. Green shipping initiatives and CO2-neutral transportation options are gaining in importance. The integration of sustainability criteria in supplier evaluation influences the selection of CIF providers.
Risk management evolution
Extended insurance products offer better protection than standard CIF cover. Parametric insurance enables faster claims settlement for defined events. Integrated supply chain insurance covers complex supply chains holistically.
Conclusion
CIF offers buyers a balance between cost control and risk management in international maritime trade. The delivery term provides price transparency on the main transportation costs, while the import handling remains the responsibility of the buyer. However, successful CIF procurement requires careful document review, appropriate insurance management and efficient customs clearance. When used strategically, CIF supports cost-efficient and predictable international procurement.
FAQ
What exactly does CIF mean?
CIF stands for "Cost, Insurance and Freight" and is an Incoterms clause for sea transportation. The seller bears all costs, insurance and freight up to the port of destination. However, the risk is transferred to the buyer when the goods are loaded at the port of shipment.
What insurance is included with CIF?
CIF includes minimum insurance in accordance with Institute Cargo Clauses (C) for 110% of the value of the goods. This basic cover excludes many risks. Buyers should check whether extended insurance is required.
When is CIF the right choice?
CIF is suitable for buyers who want cost transparency for the main transport but want to manage the import process themselves. Particularly advantageous for regular imports from the same country of origin with established customs processes.
What are the main differences to other Incoterms?
In contrast to FOB, with CIF the seller also pays freight and insurance. In contrast to CFR, transport insurance is also included. Unlike DDP, the buyer is responsible for import processing.
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