Definition of the CIP Incoterm (Carriage and Insurance Paid To)
The CIP Incoterm means the seller is responsible for delivering the goods to the carrier, contracting and paying for international transport to the agreed destination, and providing insurance coverage with a broad scope (minimum ICC Clause A).
Incoterms 2020: CIP remains valid and unchanged. It can be used for any mode of transport, including intermodal or multimodal transport.
It is especially recommended for containerized cargo, as it allows for a clear definition of the delivery point at a terminal, even if the container remains there for several days before being loaded onto the vessel.
Risk and Cost Transfer under CIP
Under CIP terms:
- Risk transfers to the buyer when the goods are handed over to the first carrier (not at the final destination).
- The seller continues to bear the cost of transport and insurance up to the agreed destination.
Seller's Obligations (CIP)
- Properly prepare and pack the goods
- Deliver the goods to the carrier at the agreed point
- Bear the risk until delivery to the carrier
- Contract and pay for main transport to the final destination
- Contract mandatory insurance with ICC A coverage for 110% of the goods’ value
- Handle export customs clearance and associated costs
- Provide necessary documentation to the buyer
Buyer’s Obligations (CIP)
- Pay for the goods as agreed in the contract
- Bear risk from the moment of delivery to the carrier
- Handle import clearance, including duties, taxes, and VAT
- Cover any additional costs not included in the transport contract (such as unloading, storage, and domestic delivery at destination)
- Optionally, purchase additional insurance if greater coverage or specific protection is desired
Insurance under the CIP Incoterm
CIP, along with CIF, is one of the only two Incoterms that require the seller to purchase insurance.
Insurance characteristics under CIP:
- Mandatory for the seller
- Must provide broad coverage (ICC A) for 110% of the goods' value
- If the buyer prefers to negotiate their own insurance (for better price or conditions), CPT may be a better alternative, as it does not require the seller to insure the goods
Quick Comparison: CIP vs CPT
| Element | CIP | CPT |
|---|---|---|
| Mandatory insurance? | Yes (by the seller) | No |
| Who arranges insurance? | Seller | Buyer (if desired) |
| Minimum coverage | ICC A (all-risk) | Not applicable |
| Risk transfer | At delivery to carrier | Same |
| Cost responsibility | Up to agreed destination | Up to agreed destination |
Sources and References
ICC – International Chamber of Commerce: Incoterms® 2020 Rules Official ICC page explaining all Incoterms 2020 rules, including obligations under CIP. https://iccwbo.org/business-solutions/incoterms-rules/incoterms-2020/
ICC Academy: Incoterms® 2020 – Differences between CIF, CIP, CPT Detailed comparison between CIP and similar Incoterms like CIF and CPT. https://academy.iccwbo.org/incoterms/article/incoterms-2020-cip-or-cif/
International Trade Administration (U.S.): Know Your Incoterms U.S. government resource offering a practical guide to Incoterms, including CIP and its insurance requirements. https://www.trade.gov/know-your-incoterms
Trade Finance Global: Incoterms® 2020 Rules – Explained Comprehensive commercial overview of Incoterms, with dedicated sections on CIP and comparison charts. https://www.tradefinanceglobal.com/incoterms/
IncoDocs: Incoterms 2020 Explained – The Complete Guide Plain-language explanation of CIP obligations, risk transfer, and insurance terms. https://incodocs.com/blog/incoterms-2020-explained-the-complete-guide/
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