Can an Invoice on a CIF LC Show Freight and Insurance Separately?

In today’s question, Muna raises an interesting point about price breakdowns in invoices under a CIF letter of credit. When the LC only states the total amount of freight and insurance, can the beneficiary still split these costs into separate lines on the invoice?

Let’s take a look.

Question

Dear Mr. Old Man,

If the LC uses Incoterms CIF with an LC amount of USD 1,200, and the invoice is presented as follows:

Description of goods:

• Item 1 – USD 500
• Item 2 – USD 500
• Insurance and freight – USD 200

Total invoice value: USD 1,200

Below that, the invoice adds:

• FOB value – USD 1,000
• Freight – USD 100
• Insurance – USD 100

Total CIF value: USD 1,200

My questions are:

1. Is the inclusion of separate insurance and freight amounts allowed?
2. Is the invoice considered compliant with what the LC requires?

Best regards,

Muna Najja

________

Answer

Dear Muna,

Thank you for your further question.

I note that the LC specifies a total of USD 200 for freight and insurance, without stating how this amount must be allocated. In your example, the invoice shows these two elements separately—USD 100 freight and USD 100 insurance—and the combined total still matches the USD 200 required by the LC.

In my opinion, such an invoice is acceptable. Since the LC only indicates the total amount and does not prohibit the beneficiary from itemizing these components, a breakdown that still aligns with the LC total is considered compliant.

(As a practical remark: in real CIF shipments, insurance is usually much lower than freight, but that does not affect the compliance assessment in this case.)

Best regards,

Mr. Old Man