Intercoms 2020 Rules For The CIF - Cost Insurance And Freight

• Published date: 03 November 2022
• Subject Matter: Insurance, Transport, Marine/ Shipping, Insurance Laws and Products
• Law Firm: Giambrone & Partners
• Author: Mr Khizar Arif

International contracts typically contain shorthand terms known as Incoterms. Incoterms is an acronym standing for international commercial terms. These standard terms hold a universal meaning for sellers and buyers around the world and are used in sales contracts for importing and exporting, delineating how costs and risks are allocated to the parties conducting international transactions. It is necessary to clarify that Incoterms provide key terms that can be incorporated into a sales contract but they are not in themselves a sales contract. Giambrone & Partners expert maritime an shipping lawyers recommend that, a contract should always be drafted, with expert legal advice, to properly document the whole agreement, incorporating the Incoterms.

Khizar Arif, a partner, pointed out 'Incoterms have been developed by the International Chamber of Commerce (ICC) which published the first Incoterms rules in 1936. Since their initial publication, they have been revised eight times, and Incoterms 2020 is the most recent version, entering into force on 1 January 2020.' Khizar further remarked. 'the current updated version of the previous Incoterms 2010 rules were adopted to reflect changes to the market over the past ten years. Older versions of Incoterms can still be used if the parties expressly incorporate them into the contract.'

Road, rail, water, and air are all modes of transportation that are covered by the Incoterms. However, this article focuses specifically on one of the Incoterms for transport over water: CIF, which stands for Cost, Insurance and Freight.

CIF

CIF means that the seller delivers the goods to the buyer: 1) on board the vessel 2) or procures the goods already so delivered.

In particular, CIF requires the seller to properly deliver the goods, cleared for export, on board the vessel at the port of shipment; to pay for the transport of the goods to the port of destination; as well as to obtain and pay for minimum insurance coverage against the buyer's risk of loss of or damage to the goods through their journey to the designated port of destination.

The minimum insurance required by CIF Incoterms 2020 covers just general average and therefore does not include theft, damage, or missing pieces. However, the parties can always negotiate wider insurance coverage.

Mode of transport

CIF applies to ocean or inland waterway transport only. This Incoterm is also mainly used for bulk cargo, oil, and oversized goods.

CIF should be used in situations...