CIF vs CFR: the difference, insurance and price
Why risk passes at the port of shipment under CIF and CFR, how much the CIF insurance covers, how a CIF price is built, and why CIP and CPT are recommended for containers.
Alper AzakoğluForeign trade consultant
3 min read
Updated:
What is CIF?
CIF (Cost, Insurance and Freight) is one of the Incoterms 2020 rules. The seller clears the goods for export, pays the ocean freight to the destination port and buys cargo insurance for the buyer. Even so, risk passes to the buyer once the goods are on board at the port of shipment.
CIF is written with the destination port: “CIF Port of Rotterdam, Incoterms® 2020”. The named port is where the freight is paid to, not where the risk passes.
What is CFR?
CFR (Cost and Freight) is CIF without the insurance. The seller pays the freight and risk passes on board, but the seller has no duty to insure. Because the buyer carries the risk during the voyage, the buyer usually insures.
CIF vs CFR side by side
| CFR | CIF | |
|---|---|---|
| Full name | Cost and Freight | Cost, Insurance and Freight |
| Risk passes | When the goods are on board at the port of shipment | When the goods are on board at the port of shipment |
| Ocean freight paid by | Seller | Seller |
| Cargo insurance | No duty for the seller; the buyer insures its own risk | Seller insures for the buyer, at least ICC (C) and 110% of the invoice value |
| Documents from the seller | Commercial invoice, bill of lading | Commercial invoice, bill of lading, insurance policy or certificate |
| Transport mode | Sea and inland waterway only | Sea and inland waterway only |
| Equivalent for containers | CPT | CIP |
Watch out
The most common mistake is thinking that under CIF the risk passes at the destination port. If the goods are damaged at sea, the buyer still has to pay and claims the loss from the insurer. That is why the insurance document must reach the buyer on time and be correctly issued.
How a CIF price is built
The CIF price is the FOB price plus ocean freight and the insurance premium. Figures are examples.
| Item (example) | Amount |
|---|---|
| FOB price | USD 21,300 |
| Ocean freight to the destination port | USD 1,800 |
| Insurance premium (example rate, on 110% of value) | USD 60 |
| CIF price | USD 23,160 |
Which one to choose
- The buyer insures its own goods: CFR is enough; your quote is simpler and you handle no insurance document.
- The buyer wants one price and one document set: CIF fits; banks under a letter of credit ask for the insurance document.
- The cargo travels in containers: Use CIP instead of CIF and CPT instead of CFR. CIP requires broader minimum cover (ICC A).
Settle delivery terms and the contract with us
We choose the right term with you, prepare the price and the document list, and coordinate the shipment.
Frequently asked questions
The seller pays freight under CIF, so why is the risk with the buyer?
In the C rules, the place where costs pass and the place where risk passes are different. The seller pays to get the goods to the destination port, but risk passes when they are loaded at the port of shipment. If they are damaged on the way, the buyer claims on the insurance the seller bought.
Is CIF insurance enough?
Often not. Under Incoterms 2020 the minimum for CIF is Institute Cargo Clauses (C), which covers major events such as fire, sinking and stranding. For breakage, wetting or theft, agree broader cover (ICC A) in the contract.
Is customs value based on CIF?
In many countries, including the European Union and Türkiye, the customs value includes freight and insurance to the border, so CIF is the reference. Some countries, such as the United States, generally exclude international freight. Check your own rules: how to calculate landed cost.
Can I use CIF for containers?
You can, but it is not recommended. Containers are delivered at a terminal, so the ICC recommends CIP instead of CIF and CPT instead of CFR.
Sources
- International Chamber of Commerce (ICC), Incoterms® 2020: iccwbo.org
Author
Alper Azakoğlu
For 30 years he has worked as foreign trade consultant and foreign trade manager for manufacturers in industrial zones across Türkiye. He writes these guides from his own work in the field.