Marine Insurance Coverage In Houston: Legal Guidance From Maritime Law Attorneys

 Marine Insurance Coverage In Houston: Legal Guidance From Maritime Law Attorneys - Cost and freight (CFR) is a trade term that requires the seller to transport the goods by sea to the required port. Cost, insurance and shipping (CIF) is what the seller pays to cover shipping costs, as well as insurance to protect against potential losses on the buyer's order.

Both are part of a larger group of international trade rules known as Incoterms. This global guide for traders was created by the International Chamber of Commerce (ICC), with the first version published in 1936.

Marine Insurance Coverage In Houston: Legal Guidance From Maritime Law Attorneys

Each term refers to an agreement governing the responsibility for delivery that falls to buyers and sellers respectively in international trade transactions. This system of agreements aids the orderly process of international trade by providing model contracts that are easily identifiable and understandable in all languages.

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Cost and delivery are legal agreements between a buyer and a seller in international trade. This rule applies to goods transported by sea.

This requires the seller to transport the goods by sea to the buyer's (obligatory) destination. Therefore, the costs are borne by the seller. Under the CFR, the seller is also required to provide the buyer with the necessary documentation to collect the goods from the carrier.

Under a CFR agreement, the shipper has more responsibility in arranging and paying for the freight compared to a minimal free on board (FOB) shipment, where the shipper is only responsible for sending the goods to the port of origin for delivery.

However, the agreement does not require the seller to purchase shipping insurance against loss, destruction or damage to the goods in transit. The risk of goods being lost once they arrive on the ship, so the seller is not responsible.

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The consignee — or buyer — assumes responsibility once the goods are loaded onto the ship. All remaining costs including for disassembly and subsequent transportation costs are borne by the recipient or purchaser.

Like CFR, CIF is restricted to use between parties dealing with goods transported by sea.

The CIF agreement is also almost the same as the CFR agreement. The seller remains responsible for all arrangements and transportation costs for sending the goods to the agreed port of destination. The consignee then assumes all cost responsibility after the goods are loaded on the ship.

The difference between the two agreements, however, lies in one additional responsibility that is the responsibility of the shipper (seller), who must also provide a minimum amount of shipping insurance on the goods sent.

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The amount of insurance is usually agreed between the buyer and the seller. The seller is also responsible for any additional costs incurred as a result of transporting the goods. This includes all additional documents required for customs clearance or inspections or route changes that must be made during transport.

The terms of the contract will outline the exact nature of the seller's responsibilities prior to transport. Most CIF contracts will spell out the following for the seller:

Company A in Morocco sells goods to buyers in the U.S., Company Z. Company A pays for shipping from Morocco to the U.S. and is responsible for shipping until the goods are loaded on board, at which point Company Z assumes responsibility, which applies to both CFR and CIF.

Under CIF, additional provisions require Company A to purchase insurance for the goods transferred. This insurance is to cover loss or damage to goods during transportation.

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CFR refers to "fee and delivery" while FCA refers to "free carrier". The FCA stipulates that the seller and buyer must agree on a point of delivery, as that is where the responsibility passes from the seller to the buyer. CFR stipulates that the seller is responsible until the goods are loaded onto the ship at the port of export.

Seller pays for shipping in CFR (cost and freight) incoterms. The seller is responsible for shipping until the goods are loaded on the ship at the exporting port.

"Incoterms" stands for "International Commercial Terms". These provisions help clarify shipping rules between international trading partners where otherwise each trading partner of a different country may have different beliefs about who pays for shipping, who buys insurance, and when each party assumes responsibility. Incoterms helps create a standard set of rules.

CFR and CIF are both very similar terms that relate to the carriage of goods by sea where the ultimate responsibility lies with the seller, specifically in the cost of shipping the goods. The difference between the two is that CIF requires marine insurance to be included, paid for by the seller, which provides coverage against any damage to the goods.

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By clicking "Accept All Cookies", you consent to the storage of cookies on your device to improve site navigation, analyze site usage and help with our marketing efforts. Cost, insurance and carriage (CIF) is an international freight agreement, which is a fee paid by the seller to cover the cost, insurance and delivery of the buyer's order while the cargo is in transit. Fees, insurance and freight only apply to goods transported by waterway, sea or ocean.

The goods are exported to the buyer's port specified in the sales contract. Once the goods are loaded onto the ship, the risk of loss or damage is transferred from the seller to the buyer. However, insuring the cargo and paying for shipping costs remains the responsibility of the seller.

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CIF is similar to freight and insurance payable (CIP), but CIF is only used for ocean and water shipments, whereas CIP can be used for all modes of transport, such as by truck.

CIF contract terms define when the seller's liability ends and the buyer's liability begins. CIF is only used when sending goods overseas or through waterways.

The seller has the responsibility to pay for the shipping costs and freight to the buyer's destination port. Usually exporters who have direct access to the ship will use CIF. However, buyers also have responsibilities, which are outlined below.

The seller must deliver the goods to the ship within the agreed timeframe and provide proof of delivery and loading.

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Once the goods arrive at the buyer's destination port, the buyer is responsible for the costs associated with importing and shipping the goods. Some of these costs include the following:

It is important to note that when shipping overseas, there may be a different transfer point of risk and fees between the buyer and the seller, depending on the type of shipping agreement. Under CIF, the transfer of risk is at a different point from the transfer of costs. The exact details of the contract will determine when responsibility for the goods transfers from the seller to the buyer.

Since the seller pays shipping, freight and insurance costs until the cargo arrives at the buyer's port of destination, a transfer of costs occurs when the goods arrive at the buyer's port. However, the transfer of risk occurs from the seller to the buyer when the goods have been loaded on board. Although the seller must purchase insurance, the buyer retains ownership of the goods once they are loaded onto the ship, and if the goods are damaged in transit, the buyer must file a claim with the seller's insurance company.

Because the buyer assumes the risk only when the cargo has been loaded on board, certain situations may not be suitable for a CIF agreement. For example, with containerized cargo shipping, goods may sit in containers for days before being loaded onto ships at the seller's port. Under CIF, the buyer would be at risk because the goods would not be insured while in the container waiting to be loaded onto the ship. As a result, CIF agreements are not suitable for shipments, including containerized cargo.

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CIF differs from cost and freight provision (CFR) in that the seller is not required to insure the goods in transit.

CIF is one of the international trade terms known as Incoterms. Incoterms are general trade rules developed by the International Chamber of Commerce (ICC) in 1936. The ICC establishes these terms to govern shipping policies and the responsibilities of buyers and sellers involved in international trade. Incoterms are often similar to domestic terms (such as the U.S. Uniform Commercial Code) but with international applications.

For example, parties to a contract must declare local laws governing their terms. The ICC restricts the use of CIF when transporting goods to goods moving through inland waterways or sea. The official ICC definition of CIF reads:

“Sellers hand over goods on board or buy goods that have already been delivered. That

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