CIF PROCEDURE – Oil & Gas

Incoterms: CIF Incoterms® 2020
Load port: Seller’s nomination, subject to availability
Discharge port: One safe port, Buyer-nominated
Quantity: As agreed in the SPA (usual operational tolerance ±10%)
Price: Platts (or other agreed marker) related, CIF named discharge range, minus/plus agreed differential
Price settlement: Marker quotations around Bill of Lading date, as stated in the SPA (commonly B/L date, or 2-1-2 / 3-2 around B/L if no quote on B/L date). Rounded to two decimal places.
Inspection: Independent inspector (SGS / Intertek / Saybolt or equivalent) at load port — binding for quantity, quality and invoicing. Discharge-port inspection is for information and claims only.
Payment: Irrevocable documentary letter of credit (MT700), payable against conforming shipping documents and load-port Q&Q certificate. Confirmation only if agreed. SBLC only if both parties agree in the SPA.
Offer: Subject to product and vessel. Price and laycan fixed in the SPA before nomination.

This page describes a normal spot CIF cargo between principals. It is not a substitute for the signed SPA.

What CIF means here

  • Seller delivers when the product is on board the vessel at the load port.
  • Risk passes to Buyer at that point.
  • Seller pays ocean freight to the named discharge port and takes out marine cargo insurance for Buyer’s account (minimum cover under Incoterms is Institute Cargo Clauses (C); parties usually agree Institute Cargo Clauses (A), 110% of invoice value).
  • Title passes as set out in the SPA (typically on payment or on endorsement of the bills of lading).
  • Buyer handles import clearance, duties and discharge-port costs.

Contract terms are the Special Provisions in the SPA, plus any GTC the parties actually agree (BP, Shell or other). The SPA specials prevail.

Procedure

1. Inquiry and firm terms
Buyer states product, volume, discharge range and target window.
Seller replies with specification, load range, laycan, price formula and payment basis.
No binding deal until the SPA is signed.

2. SPA
SPA covers: product and spec, quantity and tolerance, price formula, load and discharge ports, laycan, inspection, documents, payment, demurrage, law and arbitration.
Both parties sign. Brokers, if any, receive a copy.

3. Letter of credit
Buyer’s bank issues the LC as per the SPA.
Seller’s bank checks the LC. Loading does not start on a defective instrument.
Seller does not issue shipping documents, recent Q&Q or bills of lading before an operative LC is in place. That is the working security — not tank receipts or “proof of product” packs.

4. Vessel and loading
Seller nominates the performing vessel (name, IMO, flag, ETA load).
Buyer accepts or rejects within the time in the SPA, and only on reasonable grounds.
Inspector is appointed as agreed.
Cargo is loaded in laycan. Load-port Q&Q is taken and is binding.

5. Documents
After sailing, Seller presents to the LC bank, typically:

  • Full set of clean on-board bills of lading, freight prepaid, to order
  • Commercial invoice
  • Insurance certificate/policy, 110% of invoice, transferable
  • Load-port certificate of quantity and quality
  • Certificate of origin
  • Ullage / shore-tank comparison as customary at that terminal

Documents must match the LC. Extra papers (full charter party, manifest, etc.) only if the SPA or LC requires them.

6. Payment
If documents comply, the bank pays under the LC.
Seller endorses bills of lading as required.
Any agreed quality/quantity adjustment after discharge is settled separately under the SPA.

7. Discharge
Buyer gives discharge orders in time.
Vessel tenders NOR. Laytime and demurrage follow the SPA and the charter.
Discharge Q&Q does not reopen the invoice unless the SPA says so and variance exceeds the agreed threshold.

Notes

  • No side fees, terminal “facilitation” or extra POP charges outside the SPA.
  • CIF price is a delivered price. Do not add freight and insurance again on top of a CIF Platts marker.
  • Transferable LCs and SBLCs are tools for a specific structure. They are not the default for a principal-to-principal CIF cargo.
  • Law and arbitration are whatever the SPA states (English law / LCIA or ICC is common for this trade).
  • Product is offered only if available and only from non-sanctioned origin.

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Disclaimer: We do not accept or source fuel or petroleum products from sanctioned countries.

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