ISLAMIC UNIVERSITY IN UGANDA

KAMPALA CAMPUS
FACULTY OF LAW
GROUP 3

COURSE: INTERNATIONAL TRADE

LECTURER: MRS KAMAMA KULTHUM

N NAME REG NO
O
1 MALE EDWARD 219-053011-12189
2 KANENE JULIUS 219-053011-12220
3 NAKIMBOWA HALIMAH 219-053011-12425
4 KISAKYE DOROTHY 219-053011-12305
5 MUTEBI JOHN 219-053011-12352
6 KIWANUKA SAMUEL 219-053011-12358
7 BABIRYE ZHURAIKAH 219-053012-12175
8 NAKIGANDA AIDAH 219-053011-12345
9 KHAUKA SHANITAH EVELYN 219-053011-12199
10 NAKOWA MOREEN 219-053011-12458
11
 CIF CONTRACTS

CIF in full is Cost, Insurance, and Freight

CIF is an international agreement between a buyer and seller in which the seller has
responsibility for the cost, insurance, and freight of a sea or waterway shipment.
Although the possession of the shipment transfers to the buyer once the goods have
been loaded on the boat or ship, the seller is responsible for any shipping insurance and
freight charges.

Cost, insurance, and freight (CIF) is an international commerce term and only applies to
goods shipped via a waterway or ocean meaning CIF cannot be used for air freight. CIF
can be easier for buyers who don't want to go through the trouble of obtaining
insurance, paying freight charges, and assuming all of the responsibility for shipping
internationally.

CIF is one of the international commerce terms known as Incoterms. Incoterms are

common trade rules developed by the International Chamber of Commerce (ICC) in
1936. The ICC established these terms to govern the shipping policies and
responsibilities of buyers and sellers who engage in international trade. Incoterms are
often similar to domestic terms (such as the U.S. Uniform Commercial Code) but with
international applications.

For example, the parties to a contract must state the locale of the governing law for
their terms. The ICC limits the use of CIF when transporting goods to only those that
move via inland waterways or by sea.

Over the years, the International Chamber of Commerce (ICC) has made changes to the
terms and guidelines for international trade. In 2020, the ICC made adjustments to the
rules, (called Incoterms 2020), which in part, made changes to security requirements for
shipments.

Incoterms 2020 also made changes to the insurance coverage requirements under CIF
agreements. Sellers are now required to obtain a higher level or more comprehensive
insurance than what was required under Incoterms 2010

As a result of the CIF contracts,

The seller is responsible for the costs of moving the shipment until the goods have
arrived at the buyer's destination port. Some of these costs include fees for shipping,
export customs clearance, duty, and taxes.
The goods are exported to the buyer's port named in the sales contract. Until the goods
are delivered to the buyer's destination port, the seller bears the costs of any loss or
damage to the product. Further, if the product requires additional customs duties,
export paperwork, or inspections or rerouting, the seller must cover these expenses.

However, once the goods have reached the buyer's port of destination, the buyer
assumes responsibility for any fees or charges for unloading and delivering the shipment
to the final destination. CIF is similar to carriage and insurance paid to (CIP), but CIF is
used for only sea and waterway shipments, while CIP can be used for any mode of
transport, such as by truck.

Once the cargo has been delivered to the buyer's destination port, the buyer assumes
responsibility for the costs of importing and delivering the goods.
Terms of the CIF contracts

The contract terms of CIF define when the liability of the seller ends and the liability of
the buyer begins. CIF is only used when shipping goods overseas or via a waterway.

The seller has the responsibility for paying the cost and freight of shipping the goods to
the buyer's port of destination. Usually, exporters who have direct access to ships will
use CIF. However, the buyer has responsibilities as well, which are outlined below.

Seller's Duties under the CIF contracts.

Under CIF terms, the seller's responsibilities include:

 Purchasing export licenses for the product

 Providing inspections of products

 Any charges or fees for shipping and loading the goods to the seller's port

Duty charges for exporting the goods from the seller's port of destination are the
responsibility of the seller.

 Packaging costs for exporting the cargo

 Fees for customs clearance, duty, and taxes (for exporting)

 Cost of shipping the freight via sea or waterway from the seller's port to
the buyer's port of destination
  Cost of insuring the shipment up until the buyer's port of destination

The seller must pay for the costs of transferring and shipping the freight as well
as insuring the cargo until the goods have been delivered to the buyer's port.

 Covering the cost of any damage or destruction to the goods

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

Buyer's Responsibilities

Once the goods have arrived at the buyer's destination port, the buyer assumes
responsibility for the costs associated with importing and delivering the goods. Some of
these costs include the following:

 Unloading the product at the port terminal

 Transferring the product within the terminal and to the delivery site
 Custom duty charges and associated with importing the goods
 Charges for transporting, unloading, and delivering the goods to the final
However, duty charges at the buyer's port of destination (import duties) are the
responsibility of the buyer. destination.

Transfer of Risk

It's important to note that when shipping internationally, there can be different risk and
cost transfer points between the buyer and seller, depending on the type of shipping
agreement. Under CIF, the risk transfer is at a different point than the cost transfer. The
exact details of the contract will determine when the liability for the goods transfers
from seller to buyer.

Since the seller pays the shipping, freight, and insurance costs until the cargo arrives at
the buyer's destination port, the cost transfer occurs when the goods have arrived at
the buyer's port. However, the risk transfer occurs from the seller to the buyer when the
goods have been loaded on the vessel. Although the seller must purchase insurance, the
buyer has ownership of the goods once loaded onto the ship, and if the goods have
been damaged during transit, the buyer must file a claim with the seller's insurance
company.
Special Considerations

Since the buyer assumes the risk only when the cargo has been loaded on the vessel,
certain situations may not be suitable for a CIF agreement. For example, with
containerized cargo shipments, the goods may sit in a container for days before being
loaded onto the vessel at the seller's port. Under CIF, the buyer would be at risk since
the goods would not be insured while they sit in the container waiting to be loaded on
the vessel. As a result, CIF agreements would not be appropriate for shipments,
including containerized cargo.

Example of Cost, Insurance, and Freight (CIF)

As an example, let's say that John has ordered 1,000 flat-screen televisions from Sony
using a CIF agreement to Kobe, a Japanese port. Sony has delivered the order to the
port and loaded the product onto the ship for transport. Once loading has been
completed, the risk of loss is transferred from Sony to John. In return, Sony has
purchased insurance and pays the freight and shipping costs until the ordered goods
reach the buyer's port of destination.

While the ship is on route, a fire breaks out in one of the cargo bays. The cargo is
damaged due to the fire and the water during fire fighting efforts. Since a CIF agreement
was in place, John can file an insurance claim to cover the cost of the damaged goods.