Cost: This includes the product’s cost and any expenses directly related to preparing the goods for export, such as packaging and labeling.
Insurance: The seller arranges and pays for insurance covering the goods during transportation. This safeguards against potential damage or loss of goods during transit.
Freight: The seller is responsible for arranging and paying for the transportation of the goods to the destination port specified by the buyer.
When offering a CIF price to a buyer, calculate the total cost of the goods, insurance, and freight to the agreed-upon destination port. Ensure clarity on what is covered under insurance, the mode of transportation, and the specific destination port.
Incoterms (International Commercial Terms) are a set of standardized rules defining the responsibilities of sellers and buyers in international trade transactions. These terms, like CIF, determine who bears the costs and risks associated with the transportation and delivery of goods. Other common Incoterms include FOB (Free on Board), EXW (Ex Works), and DAP (Delivered at Place), each specifying different responsibilities and points at which the risks and costs transfer from the seller to the buyer.
When using CIF or any other Incoterm, it’s crucial to understand the obligations, risks, and costs each party assumes to avoid misunderstandings or unexpected expenses during the transaction.
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