When CIF/CIP Value Cannot Be Determined — How Should the Invoice Be Issued?

Intro

In practice, banks and beneficiaries often face uncertainty when a credit requires a CIF or CIP term but does not state how freight or insurance should be shown. Must the invoice break them down? What if the actual freight or insurance charges are unknown at the time of issuing documents?

Mr. Old Man shares some guidance based on ISBP 821 and UCP 600.

Question

Boss, please share your insights on the topic of the commercial invoice when it is not possible to determine CIF or CIP value of goods, with an example.

Ahtisham

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Answer

Dear Ahtisham,

Thank you for your question.

According to ISBP 821 paragraph C9, when a trade term is stated as part of the goods description in the credit, the invoice must indicate the same trade term. If the LC specifies the source of the trade term, such as Incoterms 2010, the invoice must mirror that same source.

Example from ISBP C9:

• If the LC states “CIF Singapore Incoterms 2010”, the invoice must not show “CIF Singapore” or “CIF Singapore Incoterms”.
• If the LC states only “CIF Singapore” or “CIF Singapore Incoterms”, the invoice may show “CIF Singapore Incoterms 2010” or any other Incoterms revision.

Do we need to show cost, freight, and insurance separately?

Not necessarily.

Unless the LC explicitly requires a breakdown, there is no obligation for the invoice to list separate amounts for goods, freight, or insurance. The only requirement is that the invoice amount complies with the LC.

However, when an LC states freight and insurance as “soft quotations” (e.g., “not exceeding”), UCP 600 article 30(c) becomes relevant, and the invoice must show actual amounts not exceeding the LC allowances.

Illustrative Example

LC details:

• LC amount: Not exceeding USD 12,200
• Goods: ABC CIF Ho Chi Minh City Port
• Cost of goods: USD 10,000
• Freight: Not exceeding USD 2,000
• Insurance premium: Not exceeding USD 200

Under article 30(c), when freight and insurance are quoted as “not exceeding,” the invoice may show actual charges, provided they remain within the LC limits.

Acceptable invoice presentation:

• Cost of goods = USD 10,000
• Freight = USD 1,850
• Insurance = USD 180
•  Total invoice amount = USD 12,030

(which does not exceed the LC amount and is within the permissible tolerance, i.e. not more than 5% less than the LC amount)

This presentation complies with the LC requirements and UCP 600 article 30(c), even though the CIF value could not be precisely determined at the time the invoice was issued.

I hope this clarifies your question.

Best regards,

Mr. Old Man