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21 Jan 2011 02:27 AM #1
What is CIF Pricing? Definition of Cost, Insurance and Freight prices
21 Jan 2011 03:10 AM #2
“CIF” (or Cost, Insurance, and Freight) is another shipping term used in international circles. Internationally, it is used to indicate a method of shipment by water. In this case, the seller’s responsibility is toward the costs and freight to take the goods to its point of destination. The buyer is responsible for any loss or damage from the point that the goods are delivered off of the ship at its destination point, and once the goods pass the ship’s rails. The buyer is then responsible for any costs incurred once the goods reach their destination and are loaded on dock. One final thing the buyer is responsible for is insurance.
Therefore, CIF includes in a lump sum cost: cost of goods+shipping+insurance to the point of destination. When buyers request a price from the seller and the seller states the “CIF Price is $125,” you now know what the price includes.
An example: A seller orders $200.00 in computer parts from Japan. The shipping charges are $25.50. Insurance is calculated as 1.5% of the cost of the goods plus shipping.
$200 (cost of goods) + $25.50 (shipping) = $225.50
1.5% of $225.50 = $3.38
The grand total of goods, shipping, and insurance: $228.88
It’s generally understood in the international community that when an item ships CIF price, it is referring to the particular delivery point at which the goods arrive.
Countries will also figure out duty according to the shipping label price. That means if you can get a cheaper method, like CIF instead of FOB, you will ultimately pay less in customs duty charges.Want To Be An eBay Powerseller?This is the Service You Need.
21 Jan 2011 05:58 AM #3
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Note that the CIF price differs from the FOB price significantly in terms of where responsibility begins and ends. In FOB, the seller is absolved from responsibility once the goods pass the rail, but in CIF he is responsible until they reach the port of destination.
Conversely, in FOB the buyer is responsible for loss and damage when the goods pass the rail. In CIF, the buyer is responsible when the goods arrive on dock at the destination point.
In both terms, the buyer is generally responsible for insurance.
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