Learning more about Incoterms®2010

Cost Insurance and Freight
or CIF (named port of
destination) Incoterms®2010
is the final of the eleven
Incoterms (it is always
plural) for the class “Rules
for Sea and Inland Waterway
Transport”. According to
the International Chamber
of Commerce (ICC),
in “the second class of
Incoterms®2010 rules, the
point of delivery and the place
to which the goods are carried
to the buyer are both ports,
hence the label ‘sea and inland
waterway’ rules”.
The other Incoterms®2010
that belong to the second class
of Incoterms®2010 are Free
Alongside Ship (FAS), Free
on Board (FOB), and Cost and
Freight (CFR). According to
the ICC, CIF, at a named port
of destination, means that “the
seller delivers the goods on
board the vessel or procures
the goods already so delivered.
The risk of loss of or damage
to the goods passes when the
goods are on board the vessel.
The seller must contract for
and pay the costs and freight
necessary to bring the goods to
the named port of destination”.
According to the ICC’s
“Guidance Note”, in instances
where Cost and Freight (CFR),
CIF, Carriage and Insurance
Paid to (CIP), or Carriage Paid
to (CPT) are used ,the seller
fulfils his obligation when he
hands over the goods to the
carrier, as specified in the
contract of sale, and not when
the goods have reached the
place of destination.
The Rule has two critical
points since the risk passes
and the costs are transferred
at different places. The ICC
advises that contracting parties
should precisely identify the
point at the agreed port of
destination, the reason being
that the costs to that point are
for the seller’s account. The
ICC further advises the seller
to procure his contracts of
carriage to match this choice
precisely. The word, “procure”
refers to multiple sales down
the chain ie, string sales.
The ICC “Guidance Note”
reminds us that CIF may not
be appropriate where goods
are handed over to the carrier
before they are on board
the vessel. In addition, CIF
requires the seller of the goods
to clear them for exports,
where applicable.
This issue concludes the
eleven Incoterms®2010.