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TRADE TERMS: FOCUSING ON CIF

Without international trade there can not be economic development. The trade contract constitutes the basis for all the activities that connect with international. Whilst the precise duties of shipping are subject to the contractual terms, it is customary for the shipper (whether the seller or buyer) to obtain export licenses, secure shipping space, transport the goods to the port of shipment, ensure that customs documentation and clearances are met and load the goods on board the vessel. In the carriage of goods the role of the trade contract cannot therefore be ignored as all other issues depend on the contents of the trade contract.

      …According to The International Chamber of Commerce, INCOTERMS are designed to create a bridge between different members of the industry by acting as a uniform language they can use. Each INCOTERM refers to a type of agreement for the purchase and shipping of goods internationally. There are 13 different terms, each of which helps users deal with different situations involving the movement of goods.[1]

CIF (Cost, Insurance and Freight) is a very commonly used incoterm. The seller’s responsibility is fulfilled when the goods are delivered to a carrier, pass the ship’s rail, the contract of carriage is arranged, freight prepaid, to the named port, and insurance is obtained on the cargo. Morever, the buyer is responsible for all risks associated with the goods after they have passed the ship’s rail to be loaded on board the vessel, as well as the costs and risks related to the goods (receipt of the goods from the carrier) in the importing country.

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[1] Foreign trade, ‘INCOTERMS’ <http://www.foreign-trade.com/reference/incoterms.cfm> accessed on 7 November 2010