CIF vs CFR: What Is the Difference?

CIF vs CFR at a glance

For a suitable shipment, consider CIF if you want seller-arranged insurance and CFR if you prefer to arrange your own cover. Compare the actual insurance and total costs before choosing.

This comparison follows ICC Incoterms® 2020. Read the CIF guide and CFR guide for each term’s responsibilities.

Freight paid to destination does not mean risk stays with the seller

Both terms distinguish the destination to which freight is paid from the earlier delivery point where risk transfers. Naming a destination port does not keep voyage risk with the seller.

CIF’s default insurance requirement is Institute Cargo Clauses (C), or similar clauses. This is limited cover. Agree any broader protection before ordering, and check exclusions, deductibles, the insured journey and claims arrangements.

Unloading costs depend on the carriage contract. If those costs are for the seller’s account under that contract, the seller cannot recover them separately from the buyer unless otherwise agreed. Request a written destination-charge breakdown.

How a Chinese supplier’s quote changes from CFR to CIF

Ask for matching product specifications, quantities, packaging, shipment schedules, routes and destination ports so that you can compare the quotes meaningfully.

Under both terms, the seller’s cost responsibilities include appropriate packaging where required, delivery on board, export clearance where applicable and freight to the named destination port. CIF additionally requires seller-arranged insurance. Request an itemised explanation of the price difference.

Compare the CFR quote plus your insurance offer with the CIF quote and its actual cover. Compare the complete purchase cost rather than the supplier’s invoice alone.

Check destination handling, unloading where excluded, clearance fees, duties, taxes and onward delivery separately. Consult the Incoterms price converter, and obtain shipment-specific charges before committing.

A decision checklist before accepting either quote

Check the handover: are goods delivered on board, or handed to a carrier earlier at a terminal? For an earlier carrier handover or multimodal transport, compare CPT and CIP.

Check insurance: ask whether your existing policy covers this purchase from the required point. For CIF, request the proposed wording and insurance document, and confirm who can claim and how.

Check destination arrangements: identify who will handle import clearance, request local charges and arrange collection or onward delivery.

Check the written contract: specify the destination port and Incoterms® 2020, identify the shipment port, and record insurance requirements and charge inclusions. To arrange and pay for the main carriage yourself, compare FOB or FCA, according to the handover.

China sourcing scenario: a bulk shipment

Suppose a buyer purchases bulk cargo from a Chinese supplier for sea transport to an agreed destination port. The supplier offers CFR and CIF on matching terms. This is a hypothetical example.

If the buyer’s existing policy adequately covers the voyage, consider CFR. If the buyer wants seller-arranged insurance, consider CIF after checking the proposed cover.

Before accepting either quote, request destination charges and confirm clearance arrangements. Compare insurance and complete costs together.

Customs value and tax: a short UK example

For imports into Great Britain valued using the transaction-value method, HMRC requires relevant transport and insurance costs up to the UK border to be included. Add applicable insurance paid separately under CFR if it is not already included; do not count insurance included in a CIF price twice.

For import VAT, add applicable duties and other import charges, excluding VAT itself, and relevant incidental expenses not already included in the customs value. These include expenses to the first UK destination and expenses resulting from transport to a further UK destination known at importation. The trade term alone does not determine the tax calculation.

Other markets have their own rules. US CBP says the CIF invoice total is not the value to declare for customs purposes. European Commission guidance includes customs value and specified additional charges in the import VAT base. Check the destination’s rules.

Related guides and quote checking

Read Incoterms explained for the wider framework and consult the Incoterms chart.

Use the Incoterms guide when reviewing a supplier’s proposed term, and request written clarification of missing charges or unclear responsibilities.