Port Of Destination

C.I.F. (Named Port of Destination) in Maritime Law

Note: There is more information on maritime/admiralty law here.

The following is a definition of C.I.F. (Named Port of Destination), produced by Tetley, in the context of admiralty law: [Translation of Port of Destination in French: “C.A.F. – coût, assurance, fret”] [Translation of Port of Destination in Spanish: “coste, seguro, flete”] [Translation of Port of Destination in Italian: “costo-assicurazione-nolo”] [Translation of Port of Destination in German: “Kosten, Versicherung und Fracht (benannter Bestimmungshafen)”] – C.I.F., or cost, insurance, freight, is a term of the contract of sale whereby the seller undertakes to pay the cost of the insurance and transport of the goods to the named port of destination. Legal delivery occurs when the goods cross the ship’s rail in the port of shipment. The purchaser takes actual delivery (possession) of the goods at the quay or other place named in the contract, as the place of destination. (The insurance premium and freight (see this maritime law term in this legal dictionary) charges are included in the price of the goods.) The risk is with the purchaser and his insurance underwriters from the moment the transportation begins (e.g. from the time the goods pass the ship’s rail in the port of shipment). A C.I.F. sale has sometimes been understood as a sale of documents, rather than as a sale of goods, but the prevalent view today is that both goods and documents conforming to the contract must be delivered under a C.I.F. sale. Incoterms 2000 (see this maritime law term in this legal dictionary) gives the following description (in part) of C.I.F.:

“Cost, Insurance and Freight” means that the seller delivers when the goods pass the ship’s rail in the port of shipment.

The seller must pay the costs and freight necessary to bring the goods to the named port of destination BUT the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time of delivery, are transferred from the seller to the buyer. However, in CIF the seller also has to procure marine insurance against the buyer’s risk of loss of or damage to the goods during the carriage.

Consequently, the seller contracts for insurance and pays the insurance premium. The buyer should note tht under the CIF term the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have the protection of greater cover, he would either need to agree as much expressly with the seller or to make his own extra insurance arrangements.

The CIF term requires the seller to clear the goods for export.

This term can be used only for sea and inland waterway transport. If the parties do not intend to deliver the goods across the ship’s rail, the CIP [carriage and insurance paid to] term should be used.”