What costs are included in the CIF price?

CIF (Cost, Insurance and Freight)

CIF (Cost, Insurance and Freight) is a commonly used CIF price quotation method in international trade, applicable to sea or inland waterway transport. The seller is responsible for delivering the goods to the named port of destination and bearing the freight and insurance premium. Risk passes to the buyer when the goods are loaded on board the vessel at the port of shipment.

1. Core Definition and Division of Responsibilities

CIF = Cost of Goods + International Freight + Marine Insurance Premium

Point of Risk Transfer: Once the goods are loaded on board at the port of shipment, all transport risks are borne by the buyer.

Seller’s Responsibilities:

1. Prepare and pack the goods, and arrange domestic transport to the port of shipment.
2. Handle export customs declaration and bear export duties and taxes.
3. Charter or book shipping space, and pay ocean freight to the port of destination.
4. Purchase marine insurance (usually insured at 110% of the CIF value).
5. Provide a full set of documents (bill of lading, commercial invoice, insurance policy, 等).

Buyer’s Responsibilities:

1. Bear all risks after the goods are loaded on board.
2. Pay for the goods.
3. Handle import customs clearance at the port of destination and pay import duties and taxes.
4. Bear terminal charges, pickup fees and subsequent inland freight at the port of destination.
5. CIF Quotation Formula

2.1 Basic Formula

CIF = FOB + Ocean Freight + Insurance Premium

Where:

FOB = Cost of Goods + Domestic Freight + Export Customs Clearance Fees + Profit

Insurance Premium = CIF × 110% × Insurance Rate

2.2 Derived Formula (for calculation)

Since insurance is included in CIF, the derived formula is used:

CIF = (FOB + Ocean Freight) ÷ (1 − 110% × Insurance Rate)

3. Detailed Cost Structure

4. Calculation Example

Assumptions:

– FOB Shanghai: 米ドル 10,000

– Ocean freight (Shanghai → Los Angeles): 米ドル 1,500

– Insurance rate: 0.5%

Calculation:

1. Denominator: 1 − 1.1 × 0.005 = 0.9945
2. CIF = (10,000 + 1,500) ÷ 0.9945 ≈ USD 11,563.60
3. Insurance Premium = 11,563.60 × 1.1 × 0.005 ≈ USD 63.60
4. CIF Quotation Notes
5. Risk ≠ Liability: The seller only arranges transport and insurance, not responsible for customs clearance or pickup at destination.
6. Insurance Markup: Usually insured at 110% of CIF value to protect the buyer’s interests.
7. Document Importance: CIF is symbolic delivery; the seller fulfills delivery obligation by tendering documents.
8. Scope: Only applicable to sea / inland waterway transport; use CIP for air or land transport.
9. Cost Transparency: Clearly list cost components in quotation to avoid future disputes.
10. Comparison with FOB and CFR