What is cost insurance and freight, is it similar to the cost of carry?
What is cost insurance and freight, is it similar to the cost of carry?
Cost Insurance and Freight abbreviated as CIF is a contract stating that the seller pays the cost of transporting the goods/products purchased to the agreed destination, and the cost of insuring them.
The buyer takes the agreed delivery of the goods at the destination named in the contract. While the contract become successful and end after the goods are safely delivered to the ship, every other forms risk during the transportation of the goods are covered by insurance.
The seller usually includes the insure and freight charges in the price of the goods. Which means when the buyer agrees to buy the goods at the stated price, the money paid or to be paid has covered the insurance and freight rates.
The seller is responsible for purchasing the license needed for the goods, must also inspect the goods, providing the insurance as stated above and also paying for any damaged goods. The Cost, insurance and freight is a typical means of shipping goods for importers.
The Cost of carry on the other hand; is the costs gotten as an outcome of an investment position. It's different from CIF. The cost could varies from bonds to interest in loans or securities.
Cost insurance and freight ( CIF ) :
is a concept used in import and export business means that products' prices which an importer got it from an exporter include all costs for shipping a container from his country to importer's country and these costs such as shipping costs include insurance, loading costs ... etc for example :
- if you want to import one container from another country with 1000 cartons inside and the exporter informed you that CIF price per each carton is 10 dollar this means that he can export the container from his country to your country until it reach your destination port at price 1000 cartons X 10 dollar = 10000 dollar without paying any shipping or insurance costs from your side and in that case the exporter will issue the invoice with 10000 dollar .
- But in case the exporter said to you FOB price per each carton is 8 dollar this means that this price is free on board ( FOB ) and the importer must pay all shipping costs from his side to the shipping line which will send a container to the exporter to load it with your 1000 cartons and in that case the exporter will issue the invoice to you by 8000 dollar ( 1000 cartons X 8 Dollar ) and the importer will pay the shipping costs include insurance himself to the shipping line without any intervention from the exporter .
And about Cost of carry : it is cost of storing a physical commodity including insurance payments, so it is not similar to cost insurance and freight ( CIF ) in its nature but the lonely similar thing between them is insurance .
Last edited by elssayed; 05-13-2019 at 02:56 PM.
The Cost of Insurance and Freight is the amount paid for the transportation of goods or products and the cost of insurance on it as it might be agreed between the buyer and the seller. The goods are expected to be delivered to a specified destination though all these must have been calculated into the price of the goods. In other words this has to do with payment for transportation and insurance on goods. It is however completely different from the Cost-of-Carry because Cost of carry is applicable when one buys or sells bonds.The rewards obtained as a result of investment in this case is referred to as Cost of carry.
C.I.F (Cost - Insurance - Frieght)
It means that the person who will ship the goods will bear the cost of the goods, insurance and freight charges until the delivery is ready at the importer's port.
F.O.B - Free On Board
The goods shall be the responsibility of the importer when the goods are ready to be delivered on the freight berth of the exporter. The importer shall assume the insurance and the expenses of shipment until reaching the port of the importer and the importer shall bear the risk of loss if anything happens to the goods.
C & F (Cost - Fright).
It means that the exporter bears the costs of the goods and the expenses of the shipment, but the importer bears the insurance expenses on the goods
C & I (Cost - Insurance).
That is, the exporter bears the costs of the goods and insurance them, but the importer bears the shipping costs from the port of the source to the port of the importer.
According to the above, each of them has different terms and advantages than the other. As explained, the importer prefers the C.I.F method. The supplier prefers the F.O.B method
Cost, Insurance and Freight (CIF) is part of Incoterms. Submission of goods with Cost, Insurance, and Freight is carried out on board, but freight and insurance premiums have been paid by the seller to the destination port, so the seller is obliged to take care of export formalities.
CIF stands for Cost, Insurance and Freight
The point of transfer of ownership of goods is the same as the cost and freight at the destination port. CIF fees are all costs as in cost and freight plus insurance premiums.
In addition to the CIF requirements, the seller has the obligation to close the insurance contract and make insurance premium payments.
Cost of insurance and payment for transportation which is the amount of money paid by someone who sells to cover a means of a principle of insurance which provides that when a loss occurs, the insured should be restored to the approximate financial condition that occupied before the loss occurred no better or no worse against a future occurrence of an uncertain event and goods or items in transport against the possibility of loss or the condition or measure of something not being intact to a person who makes purchases order as long as it is passing over to sell goods to a foreign country port in the sales to make an agreement between one or more parties. Up to the time of loading of the goods on top of a transport ship is complete, the seller support or sustain the costs of any loss or damage of commodity for sale. Supposing the product need to increase the duties or taxes imposed on on imported or exported goods or export routine work involving written documents or need inspections or the seller should cover a sum of money paid in exchange for goods or services. During some time period the luggage load, the purchase come about accountable for all other costs.
Procurement export legal document giving official permission to do something is being required for the product and agreement of moving or transportation the goods and any attempt to anticipate an unfavorable event to keep safe the value of the order and providing for checks as request for the products and to give money or other compensation to in exchange for goods or services for the price of damage of each goods position in an arrangement.
1. Free On Board (FOB)
2. Cost Insurance and Freight (CIF)
Between them FOB or Free on Board is the most suitable for the manufacturers. According to FOB, a manufacturer only make the product then the buyer will collect the goods from manufacturers shipping port with their own cost. All risk will handover to them. They will responsible for everything.
But CIF is difficult for the manufacturer. According to CIF, a manufacturer will do everything until buyer receive that goods. That means manufacturer has to pay the freight as well as the insurance cost. Cost of carry almost same as cost insurance freight.
Cost Insurance and Freight can defined as a method of terms of payment used to get goods from the factory directly to the buyer. It makes it easier for the buyer since all shipping charges, cost of merchandise, and insurance are included in the price quoted. All the buyer has to do is arrange the customs clearance when the shipment arrives in your country. There is no need for the buyer to contact a freight forwarder or insurance agent, since the factory will handle this for them.
This term keeps the supplier on a safer side for customs declaration and payments , basically for the choice of the agent/freight forwarder. Terms like Cost of Insurance Freight exposes you to a larger set of customers than if you limit yourself to delivery terms where the buyer takes on more risk.
In today advance world, people doesn't need to go to a shop or market physically to buy whatever they want to buy. They can stay in the comfort of their rooms and make an order online and it will be delivered before you know it. In the process of transporting these ordered goods to the buyer anything can happen to the goods while on transit. This is where Cost Insurance and Freight comes in.
Cost Insurance and Freight (CIF) is a situation where a seller take up the responsibility by incurring the cost of movement and insurance of a product ordered by a buyer in case of any damage or loss while moving the product to the buyer. This deal covers every possible expenses that may be incurred on the process of moving the product (custom duties or other governmental charges) until the product gets to the buyer.