CIF contract in agri trade: meaning and Incoterms CIF vs FOB

A CIF contract is a sale on cost, insurance and freight terms. The seller pays the carriage to the destination port and insures the cargo, but the risk passes once the goods are on board at loading. In agri bulk the binding CIF is usually the one in a GAFTA or FOSFA form, rather than the Incoterms® 2020 rules of the International Chamber of Commerce (ICC).

What a CIF contract does, and what it leaves open

The Incoterms® 2020 rules are eleven three-letter terms published by the ICC, in force since 1 January 2020. ICC reserves CIF for maritime trade, as one of four rules for sea and inland waterway transport with FAS, FOB and CFR.

Under the ICC rule the seller contracts for carriage to the named port, insures the cargo for the buyer's benefit and passes on the policy or certificate. The cover required is the minimum level, Clauses (C) of the Institute Cargo Clauses (LMA/IUA) or similar clauses, unless the parties agree on more.

The Incoterms® rules only take effect once a sale contract incorporates them, and they leave much to that contract:

• Title. They do not deal with the transfer of property in the goods.
• Payment. Nothing on the time, place, method or currency of payment.
• Disputes. Nothing on the method, venue or law of dispute resolution.
• Carriage. They are part of the sale contract and do not represent a contract of carriage.

CIF, C&F and FOB side by side

	FOB	CFR (C&F)	CIF
Who books and pays the ocean freight	buyer	seller	seller
Who takes out cargo insurance under the ICC rule	buyer, if it wants cover (no obligation)	buyer, if it wants cover (no obligation)	seller, for the buyer's benefit
Where risk passes under the ICC rule	on board at loading	on board at loading	on board at loading

The trade writes CFR as C&F and adds free out variants, CIFFO and C&FFO, where discharge costs are for the buyer. Most GAFTA CIF forms, 100 among them, cover all four at once; the parties strike out the terms that do not apply.

Incoterms CIF vs FOB: who inspects, who pays, whose figure is final

Under both CIF and FOB in Incoterms® 2020, risk passes when the goods are on board at the loading port; the table above shows what else differs. Neither rule says who arranges and pays the inspection that decides quality and quantity, or whose figure is final. The sale contract does, and for grain and vegetable oil that is usually a GAFTA or FOSFA form. It helps to separate three things that all get called "the inspection".

Three kinds of inspection

Checks needed to deliver. Incoterms 2020 have the seller pay for the checking operations necessary for delivering the goods, such as checking quality, measuring, weighing and counting, under FOB and under CIF.

An inspection the buyer wants before shipment. The buyer pays for a pre-shipment inspection it orders, unless the authorities of the export country require it, in which case the seller bears the cost. The ICC's checklist lists a "clean report of findings" among documents that may be needed where pre-shipment inspection is required; how that differs from a buyer's own survey is in the cargo inspection checklist.

The inspection the contract names. GAFTA 100 has the parties appoint superintendents for supervision and sampling from the GAFTA Approved Register (clause 17). FOSFA's Code of Practice for Member Superintendents lets the buyer, the seller or both appoint a superintendent, with the principal bearing the effects and the costs of its intervention; FOSFA's scheme page adds that generally the seller appoints and pays the superintendent, while the buyer pays for the goods against the documents produced. What a superintendent does on the day is in what a cargo surveyor does.

Whose figure is final

Whose figure is final is again the form's decision, and the form says it in three places: weight, quality and insurance. The GAFTA 100 and FOSFA clauses are set out in Incoterms 2020 versus the CIF in a GAFTA or FOSFA contract below.

With FOB the buyer carries the risk from loading and nominates the ship, so a loading-port figure tends to carry more weight. That is a tendency, not a rule: read the weighing and sampling clauses of the form you traded on.

A seller and a buyer trade a parcel of sunflower oil on CIF terms and agree the price on a recap that names the form but not the inspection. The seller's superintendent issues a loading certificate; the buyer appoints its own at discharge, and the two quantities differ by a little. Each side holds a certificate from a competent surveyor, each paid its own, and neither was told in advance that one of them was final. The argument is about the contract, not about measurement; the route to settle it is in GAFTA and FOSFA arbitration. Before the vessel is nominated, write four answers on the recap or in an email the other side acknowledges: who appoints the superintendent, who pays, at which port, and which certificate is final.

Risk, cost and title: three separate moments

Under CIF, risk and cost stop at different places:

1. Risk passes on board the vessel at the loading port. Loss or damage during the voyage is then the buyer's problem.
2. Cost runs to the named destination port: freight and premium are the seller's.

So a cargo can be lost at sea and the buyer still pays against conforming documents, then claims on the policy the seller handed over.

Title is the third moment. It follows the sale contract and the applicable law, and is typically tied to payment. When title passed on a given deal is a question for a lawyer on that contract.

What the seller tenders under a CIF contract

A CIF seller performs by tendering documents. GAFTA 100, one of GAFTA's CIF forms for feedingstuffs in bulk (edition effective 1 July 2026), lists them as the invoice, a full set of on-board bills of lading or negotiable delivery orders, and, on CIF and CIFFO terms, the insurance policy, certificate or letter of insurance in the contract currency, plus any other documents the contract calls for. The kinds of bill of lading, including the switch B/L used in commodity trade, are compared in bill of lading types.

The survey work lands in the quality and weight certificates: see certificate of analysis versus certificate of quality and what a weight certificate is.

Where payment runs through a letter of credit, the credit is almost always issued subject to the ICC's Uniform Customs and Practice for Documentary Credits, UCP 600, in force since 1 July 2007. In 2006 the ICC described the UCP as "written into virtually every letter of credit". The banks examine the documents alone and have at most five banking days after presentation to decide whether they comply. If the goods description in the invoice does not correspond with the one in the credit, the bank can refuse the documents, however sound the cargo. What the bank checks on the inspection certificate in particular is covered in letter of credit and the inspection certificate.

Incoterms® 2020 versus the CIF in a GAFTA or FOSFA contract

The two are separate regimes, and the contract wins: GAFTA 100 carries an international conventions clause that lists Incoterms® among the rule sets that do not apply. On a GAFTA 100 recap (the written summary of the agreed terms), the form's own clauses on insurance, weighing, sampling, payment and notices decide.

• Insurance. GAFTA 100 sets its floor by reference to GAFTA Insurance Terms No. 72: with-average cover with a 3% franchise (as a rule, partial losses below 3% are not paid; GAFTA 72 lists exceptions such as stranding, fire or collision) or better, plus war and strikes cover, for at least 2% above the invoice value. On C&F terms the buyer must arrange that same cover and, if the seller asks, prove it before loading starts.
• Weight. By default the cargo is weighed at discharge, at the buyer's cost, and the invoice is settled on that gross landed weight. The seller then pays for any shortfall against the bill of lading weight and the buyer pays for any excess, at contract price. If the parties agree weights final at loading, that deficiency rule falls away.
• Quality. GAFTA Sampling Rules No. 124 apply, and samples are drawn at discharge unless the parties chose quality final at loading. In that case the official inspection certificate issued at loading settles the quality.

FOSFA issues its CIF forms per commodity; number 54 covers vegetable and marine oil, revised April 2024. For its CIF contracts FOSFA publishes the Institute FOSFA Trades Clauses (A), (B) and (C), with matching war and strikes clauses: London-market (LMA/IUA) wordings dated 1 June 2013. The form itself sets which cover applies.

GAFTA owns the copyright in its forms and lets traders download them to trade on, but not reproduce them; FOSFA supplies its forms through fosfa.org. Which GAFTA form covers which trade is in GAFTA contract numbers explained.

Where CIF disputes start

Disputes over a CIF contract tend to start in three places.

Quality at loading versus quality at discharge. The argument is usually about which certificate the contract made final, not about the laboratory.

The weight gap. Bill of lading weight against outturn, and who carries the difference: the seller under the deficiency clause or, where weight is final at loading, the carrier or the insurer; whether the insurer pays for a small loss depends on the cover and its franchise. More in cargo claims in bulk shipping.

Late notices. Under GAFTA 100 the shipper serves the notice of appropriation (the seller's notice naming the vessel, the presumed weight shipped and the bill of lading date) within five business days of the bill of lading date. Notices go by email or another agreed electronic channel; if receipt is contested, the sender must show the notice was in fact transmitted to the addressee.

Software for the survey side

FOSS is software for inspection companies and the port, with a sector specialist at the table: measurements entered once, outturn per medium against the bill of lading weight with an automatic protest flag on a shortfall over 0.5%, and sample tracking. To see what that would mean for your survey paperwork, get in touch; we start with a free QuickScan.

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