Carriage and Insurance Paid To (CIP) is an international trade term, also known as an Incoterm, that outlines the seller’s responsibilities for delivering goods to a carrier or another party specified by the buyer, as well as arranging and paying for insurance coverage during transportation. CIP indicates that the seller fulfills their obligation when the goods are delivered to the carrier and ready for transport, and they also provide insurance coverage against the buyer’s risk of loss or damage during transit.
Key points related to Carriage and Insurance Paid To (CIP) in supply chain and international trade:
- Delivery Point: Under CIP terms, the seller’s responsibility is fulfilled when the goods are delivered to the carrier or another party named by the buyer at a specified place, which could be a transportation hub, port, or another agreed-upon location.
- Transportation Responsibility: The seller is responsible for arranging and paying for the main carriage (transportation) of the goods to the agreed-upon destination. This could involve multiple modes of transport, such as land, sea, air, or a combination.
- Insurance Coverage: In addition to transportation, the seller is also responsible for obtaining and paying for insurance coverage against the buyer’s risk of loss or damage to the goods during transit.
- Risk Transfer: The risk of loss or damage to the goods shifts from the seller to the buyer upon delivery of the goods to the carrier. However, due to insurance coverage, the buyer is protected against these risks.
- Cost Allocation: The seller covers the costs of transporting the goods to the agreed-upon destination, as well as the cost of insurance. The buyer is responsible for all subsequent costs, including customs duties, taxes, and any additional charges upon arrival.
- Applicability: CIP terms are suitable for both domestic and international shipments, and they are often used when the buyer wants the seller to arrange transportation and insurance to a specific location.
- Documentation: The seller is responsible for providing the necessary export documentation, insurance documents, and other documents required for transportation and customs clearance.
- Risk and Control: While the buyer assumes the risk once the goods are handed over to the carrier, the buyer is protected through insurance coverage. The buyer also gains control over transportation logistics and carrier selection.
- Clear Communication: Precise communication between the parties is crucial when using CIP terms to ensure a shared understanding of the delivery point, insurance coverage, and responsibilities.
CIP is one of the Incoterms that help define the terms of delivery, risk, responsibility, and insurance between buyers and sellers in international trade. Selecting the appropriate Incoterm, such as CIP, is essential to ensure that both parties understand their obligations and that costs and risks are allocated appropriately.
Seller’s Responsibility Under CIP
- Goods delivery
- Packaging and marking
- Transportation of the goods in the country of origin
- Proof of delivery
- Insurance
- Customs handling fees in the country of origin
- Customs formalities and export licenses
- Charges in the country of origin
Buyer’s Responsibility Under CIP
- Goods payment
- Charges in the destination country
- Customs handling fees in the destination country
- Customs formalities and import licenses
- Transportation of the goods in the destination country
- Payment of taxes and duties
Cargo Insurance in CIP
The CIP Incoterm is one of only two in which insurance is required (the other being the CIF Incoterm). The seller is responsible for getting cargo insurance, according to both incoterms.
If you can get better or cheaper insurance as a buyer, consider going with CPT instead, where the seller is not contractually obligated to provide cargo insurance, and you, as the buyer, can choose your desired insurance.
