Once the transaction has been agreed upon, the next question we have to cover is the shipping responsibilities and costs–is it going to be shouldered by the buyer or seller? Unlike normal single transactions online where the shipping is incurred by the buyer, this is not the case in the regular business setting where the buyer and seller have to agree on which party should shoulder the shipping cost and who will handle the inventories while they are in transit. There are various processes in the shipment of products, and one of the most popular shipping methods is referred to as CIF or Cost, Insurance, and Freight. If you want to know more about CIF and how it works, then you have come to the right place! In this short but informative blog, I will share with you important information about the subject matter if you are indeed prospecting of integrating CIF into your system and how it could potentially help your business grow. So without any further ado, let’s get right into today’s discussion of what is cif…
What are Cost, Insurance, and Freight?
If you are operating a manufacturing business, among the inevitable challenges facing the owners are shipping costs and management especially if they are acquiring the resources through the international market. With this being said–the best solution available to the business owners is what is referred to as CIF which is the acronym for Cost, Insurance, and Freight. CIF is an international shipping agreement whereby the seller takes full responsibility for the shipping costs, insurance, and freight charges in handling the inventories while they are in transit and the delivery is not yet fully consummated. However, you have to bear in mind that the CIF delivery option is available shipped in the sea or ocean.
Since the shipping responsibility is carried by the seller, they shall also bear the full shipping risks until the goods are delivered to their intended point of transfer. The shipping responsibility will be passed from the buyer to the seller when the goods finally have reached the shipping point which is supposed to be the port vessel. During the duration of travel, the products are deemed to be in the ownership of the buyer which means that the burden of management is still with them as well. Now, the contrast of CIF is CIP (Carriage, Insurance, Paid-To) whereby the ownership is transferred from the buyer to the seller as soon as the goods leave the shipping port.
How Does Cost, Insurance, and Freight Charges Work?
The term of agreement between the seller and buyer in a CIF shipping contract begins as soon as the transaction between the two parties has started. The next question here is where the point of ownership is transferred. In a Cost, Insurance, and Freight setting, the buyer will continue to be the owner of the goods up until they are delivered to the shipping port of the seller. What this means is that the buyer will bear the burden of overall responsibility over the products which includes the cost, insurance, and other related freight charge in maintaining the integrity of goods until they are delivered to their destination. Once the goods reach the ports, you have to bear in mind that they are still not fully delivered. It still has to travel by land or air until they are handed to your warehouse. However, once it reaches the port near the vicinity of the seller, the burden of responsibility is no longer with the buyer but the seller will now assume the risks involved.
I hope the blog I prepared has provided you with the insights you need about the subject matter of Cost, Insurance, and Freight. As you see, they are extremely advantageous to the seller since the cost and assumption of responsibility will not be transferred until the ownership is transferred from the port of the buyer up to the seller’s port. The risk is still with the seller and the buyer is protected from any mishaps that may happen along the way. However, you have to bear in mind that CIF is only transferred from the buyer to the seller through sea or ocean. So what this means is that it will take time for you before you receive them compared to those delivered through air or land.