International Business Law
Introduction
CIF is a trade term that denotes Cost of Insurance and Freight. It means that the person selling the goods is required to arrange to transport the consignment of goods by sea to a port as required by the buyer. The seller adopts similar obligations as under CFR but has to provide insurance mostly marine, which covers the risks of the buyer against any losses or any damage that may occur to the goods during the transportation. The seller is obligated to contract for insurance and pay the premium for the insurance. Under the terms of the CIF the seller only obtains the minimum coverage for the insurance service provided. The seller is required to clear the consignment for export. The seller is required to pay all the loading costs at the point of loading and may also include the costs of unloading the goods at the named port of delivery if its paid separately by the buyer. The seller also pays the required taxes, duties and all other charges payable for export purposes. The buyer is responsible for the other charges after the goods have been offloaded from the vessel and includes such costs as inspection costs. The term applies for ocean transportation only as the risks and the responsibilities passes from the seller to the buyer at the rail of the shipping vessel. (UNCTD, 2010)
The risks associated with the CIF are the Transportation risks also known as the infrastructure risks. These risks can impact negatively on the company’s project cash flows in case of problems with the infrastructure. For example if there is a problem on a critical high way or on major link road that can make it difficult or practically impossible to deliver the goods on time. These problems may result in losses for the seller. The infrastructure risks associated with developing countries are much higher than in developed countries.
- b) CIF is a contract that involves international transportation that mostly contain terms that have been abbreviated to describe the payment method, the place of delivery and the risk associated with the method of payment and when the risk of loss shifts away from the seller to the buyer who pays the cost of freight and insurance. These terms are normally known as incoterms and are published and coordinated by the international chamber of commerce.
Under the CIF contract the seller is required to supply the goods that conform to the contract. The seller is also required to notify the buyer in good time to take necessary measures and make arrangements before the goods are delivered. The seller is supposed to provide in good time the required documentation to the seller. These are the bill of landing, the sea waybill or the inland waterway documents. These documents must cover the period specified for shipment and they should make it possible for the buyer to claim the goods. The documents may be sent electronically through Electronic Data Interchange (EDI)
The buyer is obligated to pay the agreed price as provided by the terms of the contract. He is also obligated to receive the risks at the named port and bear all the risks associated with the loss or damage of the goods when the obligations are transferred to him at the port. The buyer inspects the goods before accepting the consignment.
References
UNCTD (2010) Review Maritime Transport 2010 Flyer. United Nations Conference on Trade and Development. Retrieved 9 December 2011. www. Unctd.com
