Cargo Insurance under C&I (Cost and Insurance) Terms — Insurance Strategy for FOB Exporters and Differences from Incoterms® 2020

Cargo Insurance under C&I (Cost and Insurance) Terms — Insurance Strategy for FOB Exporters and Differences from Incoterms® 2020

C&I, commonly understood as Cost and Insurance, is a commercial arrangement under which the price of the goods includes cargo insurance while the main freight may remain for the buyer to arrange and pay. C&I is not, however, one of the eleven official Incoterms® 2020 rules issued by the International Chamber of Commerce.

It is therefore insufficient to describe C&I simply as “CIF without Freight.” Removing the freight component from CIF does not automatically preserve the standardized CIF rules concerning delivery, transfer of risk, carriage, insurance, and the other obligations allocated under Incoterms® 2020.

Nevertheless, C&I can have substantial practical value as an export risk-management structure. In particular, an FOB exporter may be able to retain the buyer's freight purchasing power and transport arrangements while bringing cargo insurance back under the seller's own control.

Changing from FOB to CIF transfers not only insurance procurement but also the arrangement and cost of the main carriage to the seller. Where a large overseas buyer has highly competitive annual freight contracts with shipping lines or global freight forwarders, a Japanese seller may not be able to obtain equivalent freight rates. The resulting freight difference may directly reduce the competitiveness of the seller's CIF price.

Under a properly defined C&I arrangement, the main carriage can remain buyer-arranged while the seller procures cargo insurance. For many ordinary cargo risks, actual insurance cost may represent less than one percent of the FOB value, although no universal rate or ceiling applies. This can make an insurance-only change significantly easier to negotiate than transferring the entire freight arrangement to the seller.

The real value of C&I is therefore not merely a pricing formula. It can operate as a practical insurance strategy through which an exporter controls its insurer, insurance transit, scope of cover, claims response, and recovery process.

Scope of This Article

Item	Matters Covered in This Article	Other Articles or Matters Requiring Individual Review
Status of C&I	How C&I may be used in practice even though it is not an official Incoterms® 2020 rule.	The eleven official Incoterms® rules are addressed in their respective articles.
Changing from FOB to C&I	The practical benefit of leaving freight with the buyer while shifting insurance procurement to the seller.	Any change to the sales contract requires agreement between seller and buyer.
Difference from CIF	The economic difference between CIF, under which the seller also arranges main carriage, and C&I.	Official CIF obligations are determined by Incoterms® 2020.
Exporter-Controlled Insurance	How the seller may arrange continuous cargo insurance from the place of origin through the agreed destination.	Actual underwriting terms require confirmation with the insurer or handling insurance agent.
Relationship with Export FOB Insurance	How properly structured marine cargo insurance under C&I may eliminate the need for separate export FOB insurance.	Existing insurance contracts must be reviewed before cancellation or consolidation.
Earthquake and Catastrophe Risk	Lessons from the Great Hanshin-Awaji Earthquake concerning pre-shipment export cargo risk.	Current earthquake coverage depends on the actual insurance wording.
Premium and Sales Price	Comparison between the freight burden of converting to CIF and the smaller insurance-cost burden that may apply under C&I.	Actual premiums vary by cargo, route, cover, loss record, and other underwriting factors.
Transfer of Risk	How transfer of risk must be separately defined because C&I has no standardized risk-transfer rule.	Legal advice may be required where governing law or contractual interpretation is disputed.
Insurance Claims	Structuring the insurance so that parties with the relevant insurable interest can use the cover after risk transfers.	Detailed cargo claim procedures are covered in the marine cargo insurance articles.
Documentary Credits	Relationship between C&I and Insurance Policy or Insurance Certificate requirements under an L/C.	The individual documentary credit must be reviewed.

The Practical Purpose of C&I Is to Move Insurance, Not Freight, Back to the Seller

Changing an FOB export to CIF gives the seller control of cargo insurance. It also transfers the responsibility for arranging and paying the main carriage to the seller.

This is often the principal commercial obstacle.

Sea freight and air freight can depend materially on annual volume, route concentration, carrier contracts, global tenders, space commitments, seasonal conditions, and surcharges.

An overseas buyer sourcing cargo globally may have freight terms that a single Japanese exporter cannot reproduce.

If the seller replaces the buyer's freight contract with a materially higher seller-arranged freight rate, the resulting CIF price may become less competitive even though the product price itself has not changed.

C&I allows these issues to be separated.

Item	FOB	Properly Defined C&I	CIF	Meaning for the Exporter
Goods Price	Seller	Seller	Seller	The underlying product pricing remains comparable.
Main Carriage Arrangement	Buyer side	Can remain with buyer	Seller	C&I can preserve the buyer's logistics network.
Main Freight	Buyer side	Buyer side or Freight Collect	Paid by seller and reflected in sales price	C&I does not require the seller to match the buyer's freight purchasing power.
Cargo Insurance	No Incoterms obligation on seller	Seller by specific agreement	Seller obligation	C&I brings insurance control back to the exporter.
Price Impact of Insurance	Normally excluded	Insurance cost added	Insurance and freight added	The commercial price adjustment under C&I may be much smaller.
Choice of Insurer	Often dependent on buyer-side insurance after risk transfer	Seller selects insurer	Seller selects insurer	Seller can control claim-response quality.
Seller's Pre-Shipment Risk	Requires separate seller-side protection	May be incorporated into one marine cargo policy	May be incorporated into seller's cargo insurance	This is a major risk-management benefit of C&I.

Freight Is Often the Main Barrier to Converting FOB to CIF

From an insurance perspective, CIF or CIP may appear attractive because the seller controls cargo insurance. In commercial negotiations, however, the transfer of freight procurement can prevent the change.

A buyer moving thousands of containers globally may have materially better carrier terms than a seller moving only a limited number of containers on the same route.

If the seller must substitute its own higher freight rate into the CIF price, the buyer may reasonably regard the change as an increase in total procurement cost.

C&I permits the seller to propose a narrower change:

• The buyer may retain its existing shipping line or forwarder.
• The buyer's freight contract can remain in place.
• The existing Freight Collect structure may remain substantially unchanged.
• Only the party arranging cargo insurance changes.
• The seller adds the insurance cost to the sales price.
• The seller controls cargo-insurance placement and incident response.

C&I can therefore be easier to implement than a full FOB-to-CIF conversion because only the insurance function is moved back to the seller.

Insurance Cost Is Often a Smaller Commercial Barrier than Freight

Marine cargo insurance does not have a universal premium rate. Pricing depends on cargo type, packing, route, destination, mode of transport, insurance conditions, insured value, annual volume, previous losses, and other underwriting factors.

It would therefore be incorrect to state that C&I insurance must always cost less than one percent of FOB value.

In practical insurance programmes for ordinary cargo, however, insurance cost may often represent less than one percent of the FOB value. Where that is the case, changing only the insurance arrangement can be significantly easier to negotiate than transferring the entire main freight to the seller.

Illustrative Effect of Insurance Cost on the C&I Price

The following figures are illustrations only and are not market quotations.

FOB Value	Assumed Insured Value	Illustrative Premium Rate	Premium	Premium as Percentage of FOB Value
JPY 50,000,000	JPY 55,000,000	0.10%	JPY 55,000	0.11%
JPY 50,000,000	JPY 55,000,000	0.20%	JPY 110,000	0.22%
JPY 50,000,000	JPY 55,000,000	0.50%	JPY 275,000	0.55%
JPY 50,000,000	JPY 55,000,000	0.80%	JPY 440,000	0.88%

The example assumes insurance for 110% of the goods value. C&I itself contains no standardized 110% rule. The insured amount must be agreed in the sales and insurance arrangements.

The relevant management question is not simply whether insurance costs money. It is how much the actual insurance premium changes the sales price compared with the potential cost of changing the entire freight arrangement.

The Major Advantage of C&I: The Exporter Controls Its Own Cargo Insurance

Under FOB, the seller generally bears cargo risk until the agreed on-board delivery point while insurance for the subsequent international transit is commonly controlled by the buyer.

This can leave the exporter dependent on insurance selected by another party for a product that the exporter itself understands best.

A seller arranging insurance under C&I can control:

Control Area	Where Insurance Is Controlled by Buyer	Where Seller Arranges C&I Insurance	Practical Significance
Insurer	Selected by buyer	Selected by seller	Claims service can be assessed in advance.
Coverage	May not be visible to seller	Designed by seller	Cover can reflect the cargo characteristics.
Insured Amount	Buyer decision	Seller arranges as agreed	Reduces risk of inadequate insurance.
Attachment	Depends on buyer's policy	Can begin at seller warehouse	Pre-shipment risk can be insured continuously.
Termination	Depends on buyer's programme	Can extend to agreed buyer destination	Warehouse-to-Warehouse protection can be designed.
Incident Notification	May require buyer involvement	Seller can contact its insurer directly	Initial response can be faster.
Survey	Buyer or foreign insurer may control	Seller coordinates through its insurer	Evidence preservation is easier to manage.
Claim Management	Dependent on overseas process	Can be monitored from seller side	Seller can monitor recovery progress.
Subrogation	Buyer insurer controls recovery	Seller's insurer can coordinate recovery	Carrier evidence can be secured promptly.

Seller-Arranged Insurance Does Not Mean Seller Bears Risk for the Entire Transit

This distinction is fundamental.

The fact that the seller arranges insurance through to destination does not mean that the seller must retain contractual risk through to destination.

Under CIF, for example, the seller pays freight and insurance to destination while risk transfers to the buyer when the goods are placed on board at the port of shipment.

The transfer-of-risk point and the termination of cargo insurance do not have to be identical.

A seller may arrange insurance that protects the buyer or another party with the relevant insurable interest after contractual risk has transferred.

Because C&I has no standardized rule, however, the sales contract and insurance documentation must clearly establish whose interest is protected during each part of the transit.

A Properly Structured C&I Programme Can Remove the Need for Separate Export FOB Insurance

For an FOB exporter, the period from the seller's warehouse to loading on board remains particularly important.

If cargo is lost or damaged before the FOB transfer-of-risk point, the seller may suffer the economic loss.

Historically, this pre-shipment segment has often been protected through separate export FOB insurance or other domestic transit insurance.

If, however, the seller arranges marine cargo insurance under a C&I structure beginning at the seller's warehouse or factory and continuing through to the agreed buyer destination, the domestic pre-shipment movement and international movement may be protected under a single cargo insurance programme.

Where the resulting marine cargo insurance fully and appropriately covers the pre-shipment seller-risk segment, a separate export FOB insurance policy may no longer be necessary.

C&I wording on an invoice does not itself create this result. The actual insurance must be reviewed for:

• Attachment at the appropriate seller warehouse or factory.
• Coverage of domestic pickup transport.
• Necessary pre-shipment CFS, CY, or terminal exposure.
• Main ocean, air, or other international carriage.
• Transshipment and other expected movements.
• Continuation to the agreed buyer destination.
• The required earthquake and other catastrophe cover.
• Insurance that remains usable by the party with the relevant insurable interest after risk transfers.

The Great Hanshin-Awaji Earthquake and Pre-Shipment Export Risk

The Great Hanshin-Awaji Earthquake of 17 January 1995 provides an important historical example of the significance of pre-shipment insurance.

Insurance research concerning the Great Hanshin-Awaji Earthquake has pointed out differences in the treatment of earthquake losses between export FOB insurance and marine cargo insurance written on All Risks conditions.

Research concerning the event reported that some FOB and C&F exporters had export FOB insurance covering the period from their warehouse or factory to loading on the export vessel.

The export FOB insurance concerned excluded earthquake losses, and exporters that had not arranged the relevant earthquake extension were unable to recover earthquake cargo damage under that cover.

By contrast, research has reported that exporters selling under CIF and carrying appropriate All Risks marine cargo insurance were able to recover earthquake losses affecting cargo during the inland portion of the insured transit.

The lesson is not that the letters “CIF” automatically guarantee earthquake recovery.

The critical issue was that appropriate seller-arranged marine cargo insurance covering the relevant pre-shipment inland segment and earthquake peril was already in force before the catastrophe occurred.

CIF naturally facilitates seller control of such insurance.

Where converting to CIF is commercially difficult because of freight, C&I can seek the same insurance-control benefit while leaving main freight with the buyer.

Applying the Hanshin-Awaji Lesson to a Modern C&I Programme

Issue	Potential FOB Problem	C&I Response	Matter to Confirm
Seller Warehouse to Port	Seller risk may not be adequately protected by buyer insurance	Seller marine insurance begins at origin	Insurance attachment
Waiting at CY or CFS	Catastrophic loss before loading on board	Continuous marine cargo insurance	Transit and storage conditions
Earthquake	Domestic insurance may not provide the required cover	Select cargo insurance that actually covers earthquake	Applicable clauses and exclusions
After Loading	Risk transfers to buyer but seller insurance may otherwise end	Seller-arranged insurance continues for buyer's interest	Insured interest and insurance documentation
Claim Administration	Domestic and international segments may have separate insurers	Possible single-policy management	Open Policy and declaration process
Recovery	Multiple insurers may be involved	One insurer can review the overall transit	Subrogation evidence

C&I as Exporter Catastrophe Risk Management

Earthquake, tsunami, storm surge, typhoon, warehouse fire, and terminal accidents can occur regardless of whether the buyer or seller books the vessel.

Whether the exporter can recover the financial loss depends heavily on the insurance structure established before the event.

An FOB exporter does not necessarily have to divide protection mechanically between separate pre-shipment insurance and buyer-controlled post-shipment insurance.

If the parties agree that the seller will procure continuous marine cargo insurance from origin, the exporter can retain insurance control even though freight remains buyer-arranged.

C&I can therefore be considered not only as a commercial pricing arrangement but also as a component of corporate business continuity and cargo-risk management.

FOB, C&I, and CIF as Three Different Levels of Control

Structure	Main Carriage	Insurance	Seller's Additional Logistics Burden	Implementation Difficulty	Main Objective
FOB	Buyer	May be split between seller pre-shipment cover and buyer insurance	Low	Existing arrangement	Maximize buyer freight purchasing power
C&I	Buyer	Seller controls marine cargo insurance from origin	Mainly insurance administration	Often comparatively low	Retain buyer freight while moving insurance risk management to seller
CIF	Seller	Seller	Seller manages both main carriage and insurance	May be higher	Seller controls freight and insurance

Viewed this way, C&I is not merely a price located between FOB and CIF.

It is a deliberate allocation under which freight procurement remains with the buyer while insurance risk financing is moved to the seller.

Exporters for Which C&I May Be Particularly Relevant

Exporter Situation	Reason to Consider C&I	Priority Review	Practical Caution
High proportion of FOB exports	Seller can control pre-shipment risk insurance	Domestic transport and CY/CFS exposure	Contractual risk transfer must be defined.
High-value machinery or precision equipment	Large severity per shipment	ICC(A), packing, survey requirements	Coverage must reflect cargo characteristics.
Use of earthquake-exposed port areas	Catastrophe exposure before shipment can be insured by seller	Whether earthquake is actually covered	Never infer cover from the policy name alone.
Buyer has highly competitive freight	CIF would reduce seller price competitiveness	Ability to retain buyer freight	C&I must be contractually defined.
Seller cannot verify buyer's insurance	Seller can control insurance quality for its products	Potential duplicate insurance	Coordinate with buyer.
Regular annual export volume	Open Policy can standardize insurance administration	Declaration completeness	Connect insurance with shipment data.
Concern about overseas claim handling	Seller can use its domestic insurer or insurance agent	International survey network	Local claim procedures must still be followed.

Situations Where C&I May Not Be the Best Contractual Form

C&I is not a universal solution.

An official Incoterms® rule combined with a separate insurance clause may be clearer where:

• The buyer does not accept a non-standard C&I term.
• An L/C or ERP system accepts only recognized Incoterms® rules.
• The parties want maximum certainty concerning transfer of risk.
• FOB itself is unsuitable for the relevant containerized movement.
• The buyer already has comprehensive cargo insurance and duplicate coverage would complicate administration.
• Insurance regulation in the relevant country requires specific review.

For example, the parties may use FCA as the official Incoterms® rule and separately agree that the seller will procure cargo insurance for the agreed transit.

This can produce substantially the same economic allocation — buyer freight and seller insurance — while relying on an official Incoterms® rule for delivery and risk transfer.

For Container Exports, Contract Structure Is More Important than the C&I Label

Container cargo is commonly delivered to a CY or CFS before loading on board the vessel. The physical handover may therefore occur significantly before the FOB on-board risk-transfer point.

Where C&I is used for containerized exports, the parties should not merely describe it as CIF without freight. The point of transfer of risk should be expressly identified.

Where standardization is more important, FCA plus a seller-arranged insurance clause should also be considered.

Basic C&I Pricing Concept

As a commercial concept:

C&I Price = Underlying Goods Price + Agreed Seller-Arranged Cargo Insurance Cost

If the main freight remains buyer-arranged, that freight is excluded from the C&I price.

This is a commercial pricing explanation, not an official Incoterms® formula.

Do Not Automatically Copy the CIF Minimum Insurance Standard

Incoterms® 2020 CIF generally requires cover corresponding to Institute Cargo Clauses (C) or similar minimum coverage.

C&I has no equivalent standardized rule.

Accordingly, an exporter using C&I as a deliberate risk-management strategy should select the insurance condition appropriate to the cargo rather than assuming that CIF minimum cover is sufficient.

Insurance Design Checklist for C&I

Item	Matter to Confirm	Risk if Inadequate	Practical Response
Origin	Where insurance attaches	Uninsured domestic pickup	Identify the actual shipping origin.
Destination	Port, airport, or buyer warehouse	Cover terminates too early	Align with the agreed transit.
Cargo Clauses	ICC(A), ICC(B), ICC(C), or other wording	Expected loss is not covered	Select according to cargo risk.
Earthquake	Whether earthquake is actually covered	Catastrophe loss remains uninsured	Review the actual policy clauses.
War and Strikes	Additional risks required	Gaps may remain under ordinary cargo clauses	Review necessary extensions.
Insured Value	Percentage of invoice value or other agreed basis	Insufficient recovery	Specify contractually.
Currency	USD, JPY, or other currency	Mismatch with sale proceeds	Reconcile with invoice.
Open Policy	Annual declaration arrangement	Individual shipment omitted	Consider open cover for regular exports.
Booking Information	How buyer provides transport data	Seller cannot declare insurance correctly	Create a notification obligation.
Route Changes	Transshipment or destination amendment	Mismatch with insured transit	Create a prompt-change notification process.
Insurance Certificate	Whether buyer can use the insurance after risk transfer	Claim administration problem	Review insurance-document structure.

Buyer Freight Control Requires Transport Information Sharing

C&I divides two functions: the buyer controls the main carriage while the seller controls insurance.

The buyer should therefore provide the seller with sufficient information concerning the shipping line or airline, booking, vessel or flight, origin, destination, intended departure, transshipment, and material route changes.

The assumption that the seller does not need routing information because freight is buyer-paid is incompatible with seller-arranged cargo insurance.

Open Policy Can Make C&I Operationally Efficient

Regular exporters may be able to use an Open Policy or similar annual cargo insurance arrangement rather than placing insurance shipment by shipment.

Where C&I becomes part of the exporter's standard sales policy, shipment data should be connected to the insurance declaration process so that insurance does not depend on individual sales personnel remembering to arrange cover.

The key operational principle is that insurance placement should not depend solely on case-by-case human judgment where a standardized C&I programme has been adopted.

Define Transfer of Risk Separately in the C&I Contract

A contract should avoid relying only on wording such as:

C&I Singapore

That wording does not identify whether Singapore is the insurance destination, pricing point, or risk-transfer point.

The parties can use C&I as a commercial pricing expression while separately specifying an official Incoterms® rule or another clear risk-transfer provision.

Issues to State in a C&I Contract

Contract Issue	Matter to State	Purpose
Price	Goods price plus seller-arranged insurance	Define the C&I price.
Main Carriage	Arranged and paid by buyer	Distinguish the contract from CIF.
Risk Transfer	FOB, FCA, or other expressly agreed point	Remove the principal ambiguity of C&I.
Insurance	Arranged by seller	Identify the insurance-arranging party.
Insurance Transit	Seller warehouse to buyer warehouse or other agreed points	Protect the pre-shipment segment.
Insurance Conditions	ICC(A) or other agreed wording	Define coverage level.
Insured Amount	110% of invoice value or other agreed basis	Define insured value.
Booking Data	Buyer provides data to seller	Enable insurance declaration.
Insurance Documents	Seller provides appropriate document to buyer	Enable claims after risk transfer.

For Container Exports, FCA plus Seller-Arranged Insurance May Be an Alternative

If the purpose of C&I is to retain buyer freight while moving only insurance to the seller, the C&I label itself is not essential.

The parties may, for example, use FCA under Incoterms® 2020 for delivery and risk transfer and separately require the seller to procure cargo insurance through to the agreed buyer destination.

This can preserve the economic benefit of C&I while relying on an official Incoterms® rule for the transfer of risk.

Comparison of FOB, FOB plus Separate Export Insurance, C&I, CIF, and CIP

Structure	Main Carriage	Seller-Side Insurance	Pre-Shipment Insurance	Freight Competitiveness	Insurance Management	Main Caution
FOB Only	Buyer	Requires separate review	May be insufficient	Uses buyer freight	Potentially fragmented	Review seller-risk insurance.
FOB plus Export FOB Insurance	Buyer	Separate pre-shipment cover	Yes	Uses buyer freight	Domestic and international cover split	Review earthquake and other exclusions.
C&I	Can remain buyer-arranged	Seller marine cargo insurance	Can be incorporated into same policy	Can retain buyer freight	Can be centralized with seller	Non-standard term requires clear drafting.
CIF	Seller	Seller	Can be covered by appropriate insurance design	Depends on seller freight purchasing power	Seller controlled	Official rule for sea and inland waterway transport.
CIP	Seller	Seller	Can be covered by appropriate insurance design	Depends on seller freight purchasing power	Seller controlled	Well suited to multimodal and container movements.

Practical Decision Process for Introducing C&I

1. Identify annual FOB export value and number of shipments.
2. Identify the seller-risk segment before loading.
3. Determine which insurance currently covers that segment.
4. Review earthquake, tsunami, and other catastrophe coverage under current pre-shipment insurance.
5. Identify segments where the seller currently depends on buyer-controlled insurance.
6. Obtain a quotation for seller-arranged Warehouse-to-Warehouse marine cargo insurance.
7. Calculate the annual insurance cost as a percentage of annual FOB sales.
8. Separately calculate the freight effect of converting to CIF.
9. Compare the commercial effect of CIF conversion with C&I conversion.
10. Propose to the buyer that freight remain unchanged while only insurance moves to the seller.
11. Document risk transfer, insurance transit, coverage, and insured amount.
12. Connect the export shipment process with the Open Policy declaration process.

Management Should Compare Premium with Maximum Possible Loss

The relevant management comparison is not only the annual insurance premium.

The exporter should compare that premium with the maximum loss that could arise from a single shipment or catastrophe.

Even where an annual insurance programme costs a meaningful amount, the economic analysis changes if a single CY, CFS, or domestic-transit catastrophe could expose the company to tens or hundreds of millions of yen in uninsured cargo loss.

The historical lesson from the Great Hanshin-Awaji Earthquake is that a low-frequency risk may still generate a highly concentrated pre-shipment loss.

Common Misunderstandings

Misunderstanding	Actual Practice	Practical Caution
C&I is an official Incoterms® rule.	It is not one of the eleven official Incoterms® 2020 rules.	Define the contractual allocation expressly.
C&I is simply CIF with freight deleted.	The CIF risk-transfer and other rules do not automatically remain.	Define risk transfer separately.
The only way to move insurance to the seller is to change FOB to CIF.	Freight may remain with the buyer while insurance is arranged by the seller.	Consider C&I or an official rule plus a separate insurance clause.
If CIF is safer, every FOB sale should simply be changed to CIF.	Seller-arranged freight may be less competitive than buyer freight.	Include freight purchasing power in the decision.
C&I is difficult because insurance is expensive.	Insurance cost may represent a comparatively small percentage of ordinary cargo value.	Calculate the actual annual premium effect.
C&I insurance must always cost less than 1% of FOB value.	Rates depend on cargo, route, cover, loss history, and other factors.	Do not treat 1% as a guaranteed ceiling.
Using C&I automatically eliminates export FOB insurance.	The marine policy must first cover the pre-shipment segment appropriately.	Eliminate gaps before removing duplicate insurance.
If the seller arranges insurance, the seller bears risk to destination.	Insurance transit and contractual risk transfer are separate concepts.	Review sales and insurance contracts separately.
CIF exporters recovered after the Hanshin earthquake simply because the sale was CIF.	The decisive issue was appropriate marine cargo insurance including the relevant inland earthquake loss.	Review actual coverage, not only the trade term.
If the buyer has cheap freight, the seller cannot improve its insurance position.	The buyer may retain freight while the seller takes control of insurance.	This is a central practical use of C&I.
Buyer insurance always protects the seller before FOB delivery.	The seller must confirm its own economic interest and actual policy coverage before risk transfer.	Do not assume buyer insurance protects seller risk.
Carrier recovery can replace cargo insurance.	Carrier liability may involve exclusions, limitations, and evidential requirements.	Cargo insurance and carrier liability serve different functions.

Cases That Frequently Cause Practical Problems

Case	Main Issue	C&I Approach	Evidence or Data to Review	Response
Buyer has very competitive ocean freight	CIF conversion increases seller price	Leave freight with buyer and move only insurance	FOB price, freight comparison, insurance quotation	Present the C&I price effect.
High-value machinery sold FOB	Large seller exposure before shipment	Start seller marine insurance from warehouse	Cargo value, transit, insurance conditions	Review overlap with separate FOB insurance.
Earthquake occurs while cargo waits at CY	Risk may still be on seller before loading	Use marine insurance that includes the required earthquake cover	Policy and Gate-in Record	Notify insurer and confirm insured transit.
Seller does not know buyer's insurance conditions	Required product cover may be unknown	Seller determines cargo cover	Sales contract and policies	Coordinate to avoid unnecessary duplicate insurance.
Buyer changes shipping line	Seller insurance declaration no longer matches actual transport	Require buyer change notification	Booking amendment and insurance declaration	Notify insurer promptly.
L/C uses C&I wording	Insurance-document obligations unclear	Review specific Insurance Certificate requirements	L/C and certificate	Reconcile before shipment.
Seller already has Open Policy	FOB cargo is managed separately	Bring C&I shipments into the marine programme	Open Policy and export data	Standardize declarations.
Buyer continues its own insurance	Potential duplicate insurance	Define whose interest and transit each policy protects	Both policies	Coordinate during contractual conversion.

Decision Checklist

Review Stage	Party to Contact	Matter to Confirm	Action if a Problem Is Identified
Current FOB Analysis	Sales, logistics, accounting	Annual FOB sales, shipment count, maximum shipment value	Quantify maximum cargo exposure.
Pre-Shipment Insurance	Insurer, handling insurance agent	Current export FOB or domestic transit coverage	Identify uninsured segments.
Earthquake Review	Insurer, handling insurance agent	Earthquake, eruption, and tsunami treatment	Consider appropriate additional cover.
CIF Costing	Forwarder, shipping line, sales	Freight obtainable by seller	Compare with buyer freight.
C&I Costing	Insurer, handling insurance agent	Annual premium and premium rate	Calculate percentage impact on FOB sales.
Buyer Negotiation	Buyer	Whether freight can remain unchanged while insurance changes	Propose C&I or a separate insurance clause.
Risk Transfer	Seller and buyer	FOB, FCA, or another agreed transfer point	Record expressly in contract.
Insurance Transit	Insurer, handling insurance agent	Seller warehouse through agreed destination	Eliminate uninsured gaps.
Coverage	Seller, insurer, handling insurance agent	ICC(A)/(B)/(C) and additional risks	Match cover with cargo characteristics.
Open Policy	Insurer, handling insurance agent	Declaration method and covered exports	Create controls against omitted declarations.
Booking Data	Buyer, prime freight forwarder	Vessel, route, destination, and changes	Set a deadline for information provision.
Insurance Certificate	Seller, buyer, insurer	Whether buyer can use the document after risk transfer	Correct insured-interest or documentation structure.
L/C	Banking parties, seller, buyer	Insurance document requirements	Resolve documentary discrepancies in advance.
Loss or Damage	Insurer, handling insurance agent, relevant carriers	Incident point, risk transfer, and insurance transit	Notify without waiting for final liability determination.

When to Consult an Insurance Agent, Maritime Lawyer, or Other Specialist

Situation	Main Party to Consult	Matter to Confirm	Why Prompt Consultation Matters
Considering conversion from FOB to C&I	Insurer or handling insurance agent	Annual cargo value, maximum shipment, conditions, and premium	The actual cost should be known before buyer negotiations.
Consolidating separate export FOB insurance	Insurer or handling insurance agent	Marine insurance attachment, overlap, and gaps	Cancellation must not create an uninsured segment.
Designing earthquake and tsunami protection	Insurer or handling insurance agent	Applicable clauses, exclusions, and extensions	Coverage cannot be determined from the policy label alone.
Drafting the C&I risk-transfer provision	Where necessary, maritime or international-trade lawyer	Sales contract, governing law, and delivery point	C&I provides no standardized rule.
Combining FOB or FCA with a separate insurance clause	Insurer, handling insurance agent, and where necessary lawyer	Risk transfer and insurable interest	Sales and insurance contracts must remain consistent.
Major pre-shipment loss	Insurer or handling insurance agent	Attachment, cause, survey, and recovery	Physical evidence may disappear quickly.
Seller and buyer dispute entitlement to insurance proceeds	Insurer and where necessary maritime lawyer	Risk transfer, insurable interest, Policy, and Certificate	The C&I contract design itself may become the disputed issue.

Example 1: Buyer Has Cheaper Freight and CIF Conversion Is Commercially Unacceptable

A Japanese manufacturer exports approximately 100 containers per year on FOB terms. The overseas buyer imports several thousand containers globally and has highly competitive annual ocean freight terms with a global forwarder.

The manufacturer considers changing to CIF to improve pre-shipment insurance control, but the freight available to the seller would increase the buyer's total procurement cost. The buyer therefore rejects the CIF proposal.

The choice does not have to remain between FOB and CIF.

The parties can consider retaining buyer-arranged freight while the seller procures Warehouse-to-Warehouse marine cargo insurance under a C&I-type arrangement.

The buyer retains its freight purchasing advantage, while the seller obtains control over cargo insurance including the pre-shipment segment.

Example 2: Insurance Cost on JPY 50 Million of Machinery

Assume machinery with an FOB value of JPY 50 million, an agreed insured amount of JPY 55 million, and an illustrative premium rate of 0.20%.

The resulting premium is JPY 110,000, equivalent to approximately 0.22% of the FOB value.

If replacing the buyer's annual ocean freight contract with seller-arranged freight would create a substantially larger cost difference, an insurance-only conversion may be commercially easier than CIF conversion.

The rate is illustrative only. The important point is to calculate the actual insurance-cost percentage before concluding that C&I would be too expensive.

Example 3: Applying the Hanshin-Awaji Earthquake Lesson to a Current Export

High-value export cargo leaves the seller's factory and is delivered to a Kobe-area CY. Before the container is loaded on board, a major earthquake damages the container and cargo.

Under an FOB structure, the risk may still remain with the seller before on-board delivery.

If the seller has only pre-shipment insurance that does not cover the earthquake peril, a substantial uninsured loss may result.

If the seller has arranged appropriate marine cargo insurance under C&I from the seller warehouse through the buyer destination, including the required earthquake cover, the insurance structure avoids the fundamental break between domestic pre-shipment risk and international cargo insurance.

The relevant protection comes from the insurance contract already being in force, not merely from the C&I label.

Example 4: Consolidating Separate Export FOB Insurance after C&I Conversion

A manufacturer previously insured its FOB exports using separate pre-shipment export FOB insurance from its warehouse to vessel loading, while the buyer controlled insurance after loading.

The parties change to a C&I structure and the seller's Open Policy now covers the cargo continuously from the seller warehouse to the buyer warehouse.

The seller should then review whether the separate export FOB insurance still serves any necessary purpose.

If the marine cargo policy properly attaches at the seller warehouse and provides the required pre-shipment cover, the two insurance arrangements may be consolidated.

The objective is not merely to reduce the number of policies. It is to remove both insurance gaps and unnecessary overlap.

Example 5: Buyer Changes the Vessel without Informing the Seller

The buyer arranges ocean freight and provides the initial booking information to the seller, which declares the shipment under its C&I marine cargo insurance.

The buyer subsequently changes shipping line but does not inform the seller.

This illustrates a structural weakness of C&I: freight information and insurance responsibility are held by different parties.

The contract should therefore require the buyer to provide routing information and notify material booking or destination changes promptly.

Example 6: Using FCA plus a Seller Insurance Clause Instead of the C&I Label

A buyer refuses to accept C&I because its ERP system accepts only recognized Incoterms® rules.

The parties therefore agree FCA under Incoterms® 2020 and add a separate clause requiring the seller to procure agreed cargo insurance from the seller warehouse to the buyer warehouse.

The main freight remains buyer-arranged.

The arrangement achieves substantially the same commercial objective — buyer freight and seller insurance — while using an official Incoterms® rule to establish delivery and transfer of risk.

The purpose of the strategy is not to preserve the C&I abbreviation. It is to allow the exporter to control its own cargo insurance without unnecessarily taking over the buyer's freight procurement.

Summary

C&I is not one of the official Incoterms® 2020 rules, but it has long existed in actual trade and cargo-insurance practice and can have substantial value for FOB exporters.

Changing from FOB to CIF gives the seller control of cargo insurance, but it also transfers the main freight arrangement to the seller. Where the buyer has superior freight purchasing power, that freight difference may make CIF conversion commercially unattractive.

C&I allows the buyer's freight arrangement to remain in place while only insurance is brought back under seller control.

Insurance rates vary materially, but for ordinary cargo the insurance cost may in many cases represent less than one percent of FOB value. Where this is the case, the commercial barrier to C&I conversion can be far smaller than the barrier to transferring the entire freight arrangement under CIF.

The principal value of C&I, however, is not simply that insurance can be relatively inexpensive.

Its principal value is that the exporter can select and control the insurance protecting its cargo, begin that insurance at its own warehouse, protect the pre-shipment domestic and terminal segment, and manage claims through its own insurer or insurance agent.

Insurance research concerning the Great Hanshin-Awaji Earthquake has identified an important difference between export FOB insurance that did not cover earthquake losses and appropriate All Risks marine cargo insurance covering the inland pre-shipment transit. The lesson is not that CIF or C&I automatically guarantees recovery, but that the required cargo insurance must already cover the relevant location, period, and peril when the loss occurs.

Cargo risk does not begin when the vessel sails. It exists during factory release, domestic pickup, CFS or CY handling, terminal storage, and other pre-shipment stages.

If properly designed C&I marine insurance begins at the seller's warehouse and continues through the agreed destination, the seller may be able to incorporate its pre-shipment exposure into the same marine cargo programme and eliminate the need for separate export FOB insurance.

C&I must nevertheless be drafted carefully because it is not a standardized Incoterms® rule. The parties should expressly determine risk transfer, main carriage, freight allocation, insurance transit, coverage, insured amount, insurance documentation, and the buyer's obligation to provide booking information.

Where use of a non-standard C&I label is undesirable, an official rule such as FCA combined with a separate seller-arranged insurance provision may achieve the same practical objective.

The key question for an FOB exporter is therefore not merely, “Can we change FOB to CIF?”

The more useful question may be: “Can we leave Freight with the buyer while bringing Insurance back under the seller's own control?”

C&I is one practical answer to that question.