CIF and CFR differ by exactly one thing — insurance. But the cover your supplier buys under CIF is the legal minimum, and it won't pay out on the losses that actually happen. Here's what Australian importers need to know, with a worked Sydney example.
Last updated: 12 September 2026
In short: CIF and CFR are identical in every respect except one — CIF requires your supplier to buy marine cargo insurance, CFR doesn't. Under both, the seller pays the ocean freight to your named Australian port, but risk transfers to you the moment the goods are loaded onto the vessel in China. The catch: the insurance your supplier buys under CIF is the legal minimum (Institute Cargo Clauses C), and for most Aussie importers that cover is close to worthless.
One letter, and it's the "I".
Everything else — who clears export, where risk transfers, who pays duty and GST, who gets the container off the wharf — is identical.
Both are Incoterms 2020 rules, and both are sea and inland waterway only. If you're air freighting, neither applies. Use FCA (Free Carrier) instead.
| Cost or obligation | CFR | CIF |
|---|---|---|
| Export packing and marking | Supplier | Supplier |
| Inland transport to Chinese port | Supplier | Supplier |
| Export customs clearance | Supplier | Supplier |
| Origin terminal handling and loading | Supplier | Supplier |
| Ocean freight to your Australian port | Supplier | Supplier |
| Marine cargo insurance | You (or nobody) | Supplier — minimum cover only |
| Destination terminal handling and wharfage | You | You |
| Australian import duty and GST | You | You |
| Customs brokerage and Import Declaration | You | You |
| Transport from wharf to your warehouse | You | You |
| Where risk transfers | On board the vessel in China | On board the vessel in China |
This is the bit that trips up nearly every first-time importer, and it's worth reading twice.
Under CIF and CFR, your supplier pays for the ocean freight all the way to Port Botany. But risk transfers to you when the goods are loaded on the vessel in China — not when they arrive in Sydney.
So if the vessel hits heavy weather in the South China Sea and your container goes overboard, the goods were legally yours when it happened. Your supplier has fully performed their contract. You still owe them the full invoice. Your only recourse is an insurance claim.
That's why the "I" in CIF matters so much — and why it matters even more that you understand exactly what that "I" buys you.
Here's the part your supplier won't volunteer.
Incoterms 2020 obliges a CIF seller to insure at Institute Cargo Clauses (C) — the narrowest marine cover on the market — for 110% of the contract value, in the contract currency.
Clauses C is a named-perils policy. It covers things like fire, explosion, the vessel sinking, grounding, collision, and general average sacrifice. That's roughly it.
What Clauses C does not cover:
Now think about what actually goes wrong with Australian imports. It's almost never a sinking. It's a container that arrives with 40 crushed cartons, or a pallet that's been opened and half-emptied somewhere between the factory and the wharf. Clauses C pays out on none of that.
The fix is straightforward: either specify Institute Cargo Clauses (A) in your purchase order and pay the small premium difference, or arrange your own all-risks marine cover through an Australian broker who'll actually answer the phone when you claim. The second option is usually better — you control the policy, the claims process runs in your timezone, and you're not chasing a Chinese insurer through a Chinese loss adjuster.
Say you're a Sydney retailer importing a 40ft container of homewares, invoice value AUD $46,000. Here's how CIF and CFR compare on the same shipment.
| Line item | CFR Port Botany | CIF Port Botany |
|---|---|---|
| Goods value | $46,000 | $46,000 |
| Ocean freight Shanghai to Sydney (40ft) | Included | Included |
| Marine insurance (Clauses C, 110% of value) | Not included | Included (approx. $150) |
| Supplier's invoice to you | $48,300 | $48,450 |
| Destination THC and wharfage | $680 | $680 |
| Customs brokerage and Import Declaration | $180 | $180 |
| Import duty (5%, HS-code dependent) | $2,415 | $2,415 |
| GST (10% of customs value + duty) | $5,072 | $5,087 |
| Wharf to warehouse, Sydney metro | $520 | $520 |
| Total landed cost | $57,167 | $57,332 |
The difference is $165 — about 0.3%. For that, CIF gives you a policy that won't pay out on the most common loss types. Which is why, if you're going to use CIF at all, the sensible move is to specify Clauses A in writing and treat the supplier's default cover as a placeholder.
Note also that GST is calculated on the customs value including insurance and freight, so a higher CIF value marginally increases your GST. Small, but it compounds across a year of containers. Our landed cost guide has the full calculation.
Honest answer: for most established importers, neither is the best option. Here's the reasoning.
Under CIF and CFR, your supplier picks the shipping line, the routing and the forwarder. You'll often find the freight portion of their quote is 20–40% above what you'd pay booking direct, because it's an easy place to hide margin. You also can't chase the vessel yourself when it's late.
The classic CIF sting. Your supplier books with a nominated forwarder in China, and that forwarder's Australian agent then bills you "destination charges", "documentation fees" and "agency fees" that can run to $700–$1,200 per container. You have no leverage — they're holding your release. This is common enough that it's worth budgeting for if you're going CIF with an unfamiliar supplier.
You're carrying the risk from the moment of loading, but you have no say in the carrier, the vessel or the routing. That's the worst of both worlds.
When CIF or CFR genuinely makes sense: your first one or two shipments, when you have no forwarder relationship and no customs broker, and the simplicity is worth the premium. Also when your supplier has real freight volume and passes on a genuinely competitive rate — some larger factories do.
When to move away from it: as soon as you're shipping regularly. Switch to FOB or FCA, appoint your own Australian freight forwarder, and you'll usually claw back both the hidden freight margin and the destination-charge sting. Our comparison of FOB vs CIF vs DDP covers the transition.
CFR is marginally cheaper on the invoice because it excludes the insurance premium — typically 0.2–0.4% of cargo value. But CFR means nobody has insured the shipment unless you've arranged your own cover, and you carry the risk from the moment of loading. In practice, CFR plus your own all-risks policy is usually both cheaper and better protected than CIF with the supplier's minimum cover.
You do. Under both CIF and CFR, the seller's obligation ends at the named port of destination. Australian import clearance, the ABF Import Declaration, duty, GST and any DAFF biosecurity requirements are all yours, and you'll need a licensed customs broker for anything over the AUD $1,000 threshold.
No. CIF and CFR are defined for sea and inland waterway transport only. Using them on an airway bill creates genuine legal ambiguity about where risk transfers. For air freight, use CIP (Carriage and Insurance Paid To) or FCA.
Institute Cargo Clauses (C) — a named-perils policy covering fire, explosion, sinking, grounding, collision and general average — at 110% of the contract value in the contract currency. It does not cover theft, pilferage, breakage, water damage outside listed events, or non-delivery. If you want all-risks cover, you must specify Institute Cargo Clauses (A) in your contract.
No, and this is the most common misunderstanding. CIF ends at the port of destination — the wharf. Terminal handling, wharfage, customs clearance, duty, GST, container detention and road transport to your premises are all on you. If you want door delivery, you're looking at DAP or DDP, not CIF.
We've sourced more than 20,000 products for over 300 clients, with bilingual teams on the ground in China and Vietnam and offices across five countries. A big part of what we do is stop Aussie businesses from accepting whatever Incoterm the factory's quotation template happened to spit out.
Our clients average around 77% savings — and reviewing the freight terms is often where a meaningful chunk of that hides. If you've got a CIF quote in front of you and you're not sure whether it's genuinely competitive or quietly padded, give us a bell. We'll pull it apart with you.
Worth a read next: what FCA (Free Carrier) means, shipping container prices in Australia in 2026, and our marine cargo insurance guide. If you'd rather hand the whole lot over, have a look at importing products from China to Australia.
