Definition of the CIP Incoterm (Carriage and Insurance Paid To)

Quick Overview

The CIP Incoterm (Carriage and Insurance Paid To) means the seller delivers goods to the carrier, pays for international transport to the agreed destination, and provides broad insurance coverage with a minimum of ICC Clause A for 110% of the goods' value. Risk transfers to the buyer at the first carrier, and CIP suits any transport mode.

What changed in Incoterms® 2020? CIP remains available for any transport mode, including multimodal shipments. However, its default insurance requirement increased from Institute Cargo Clauses (C) under Incoterms® 2010 to Institute Cargo Clauses (A), or equivalent coverage, under Incoterms® 2020. The parties may expressly agree to a different level of coverage.

CIP explained in 30 seconds

See how CIP separates delivery and risk transfer at the first carrier from carriage and insurance provided to the named destination.

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
• Arrange the required cargo insurance to the named destination, normally under Institute Cargo Clauses (A) or equivalent, for at least 110% of the contract price.
• 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:

• The seller must arrange cargo insurance covering the buyer’s risk from the agreed delivery point to at least the named destination.
• Under Incoterms® 2020, the default coverage is Institute Cargo Clauses (A) or equivalent, unless the parties expressly agree otherwise.
• The insured amount must be at least 110% of the contract price, in the contract currency.
• Broad coverage remains subject to policy exclusions, conditions and any applicable deductibles. “All risks” does not mean every possible loss is covered.
• If the buyer prefers to arrange insurance independently, consider CPT, which requires the seller to pay carriage but does not require the seller to obtain insurance.

Hypothetical CIP shipment and cost example

A German manufacturer sells laboratory equipment under CIP terms, with carriage and insurance paid to an agreed distribution center in São Paulo. The shipment travels by truck from Munich to Hamburg, by sea to Santos, and by truck to the named destination.

The parties specify delivery to the first carrier at the manufacturer’s Munich premises. Risk transfers to the buyer at that delivery point, while the seller pays for the agreed carriage and insurance to São Paulo.

The following amounts are invented for illustration. They are not current freight rates, carrier quotations or published market benchmarks.

For this example, destination handling and trucking are included in the seller’s contracted carriage. The total excludes the goods’ price, import duties and taxes, import-clearance charges, and any additional services outside the agreed scope.

The insurance premium is the price paid for the policy; it is different from the insured amount. Actual premiums depend on the insured value, goods, route, coverage and insurer.

The buyer handles import clearance and applicable duties and taxes. Calculate these separately using the actual product classification, customs valuation and current Brazilian requirements.

Quick Comparison: CIP vs CPT

CIP vs CPT vs CIF: Transport, Risk and Insurance

Sources and References

• ICC – International Chamber of Commerce: Incoterms® 2020 Rules
  Official ICC page explaining all Incoterms 2020 rules, including obligations under CIP.
• ICC Academy: Incoterms® 2020 – Differences between CIF, CIP, CPT
  Detailed comparison between CIP and similar Incoterms like CIF and CPT.
• International Trade Administration (U.S.): Know Your Incoterms
  U.S. government resource offering a practical guide to Incoterms, including CIP and its insurance requirements.
• Trade Finance Global: Incoterms® 2020 Rules – Explained
  Comprehensive commercial overview of Incoterms, with dedicated sections on CIP and comparison charts.
• IncoDocs: Incoterms 2020 Explained – The Complete Guide
  Plain-language explanation of CIP obligations, risk transfer, and insurance terms.