Incoterms: What Cost, Insurance & Freight (CIF) means for importers | Vince Barnes & Rob Naumovski

Intergroup Australia's Managing Director Vince Barnes & Freight Manager Rob Naumovski took some time out to discuss what the "Cost, Insurance & Freight" (CIF) Incoterm rules imply for Australian Exporters and Importers of goods.
We often encounter businesses that mistake Incoterm rules when shipping their goods, so this video is intended to clarify the, often subtle, but important differences between CIF and other Incoterm methods of carriage.

CIF is typically used for large deliveries that are shipped by sea. The seller bears responsibility for loading shipments onto a vessel and covers the cost of shipping and insurance. The seller also obtains any necessary documentation, licenses, and organises inspections that may be required.

The buyer assumes full responsibility for the goods when they're loaded onto the vessel at the port of origin under a CIF agreement. This includes any expenses incurred at the destination port such as customs fees.

At 5:20 Vince outlines an example of an Intergroup client in the paper industry who uses CIF to import from around the globe. At the huge product volume this client requires, CIF is a good match for most of his needs.

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The International Chamber of Commerce (ICC) established Incoterms in 1936 to promote open markets and ensure global economic prosperity through trade.
Essentially, Incoterms are a set of guidelines that help Buyers (Consignees) and Sellers (Consignors) by providing a common language that can be used to set terms of trade.
Activities that call for the use of Incoterms include; filling out purchase orders, labeling shipments for transport, and completing certificates of origin.
Incoterms are updated periodically to conform to changing trade practices.

To note:

Incoterms do not preclude contracts, insurance and other liability agreements, but they do, however, allow logistics experts to speak in shorthand to get goods from location to location in the most business appropriate way.

Incoterms do not :
-address all sale conditions
-Specify customs clearance processes
-Identify the goods being sold
-Reference the methods or timings of payments
-Address liability for contract failures
-Determine when the title, or ownership of the goods, passes from the seller to the buyer

Incoterms omit certain sale conditions, so all parties involved in any contract should make sure to address the above conditions contractually.

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*Intergroup Australia advises all information contained in this video is general in nature and should not be considered to be formal, legal, consulting or professional advice.