Comprehensive guide to understanding Carriage and Insurance Paid To (CIP) Incoterm: roles, responsibilities, and risk transfer between buyers and sellers.
Seller arranges & pays
Seller provides
At origin (first carrier’s point)
CIP means the seller pays for international transportation and minimum insurance, but the risk transfers to the buyer at the first carrier point.
CIP (Carriage and Insurance Paid To) is an international trade term where the seller arranges and pays for transportation and insurance up to the agreed destination, but the risk transfers to the buyer once the goods are handed over to the first carrier.
Compare CIP with other Incoterms to understand the key differences
Understanding your obligations under CIP (Carriage and Insurance Paid) terms
Responsible for transport costs and insurance coverage until destination
Handles import clearance and assumes risks after first carrier
| Responsibility | Seller | Buyer |
|---|---|---|
|
Export Packing & Marking
Proper packing for export transport Seller must properly pack and mark the goods for export transportation, ensuring safe delivery |
||
|
Export Documentation
Required export documents All documentation required for export including licenses and certificates |
||
|
Main Carriage
International transport costs International transport costs to named destination, including local charges |
||
|
Insurance Coverage
Minimum coverage required Seller must provide minimum insurance coverage (110%). Buyer can purchase additional coverage if needed. |
Optional Extra | |
|
Import Clearance
Customs duties and taxes All import duties, taxes, and customs clearance procedures at destination |
||
|
Destination Handling
Unloading and delivery All costs related to unloading and final delivery at destination |
||
|
Additional Costs
Extra fees and charges Any additional costs, charges, or fees at destination |
Important information about risk transfer and liability
Risk transfers to the buyer when goods are handed over to the first carrier, even though the seller continues to arrange and pay for transport and insurance.
The seller’s insurance covers a minimum of 110% of the cargo value, as required under Incoterms 2020 (ICC Clauses A). The buyer may choose to purchase additional coverage if needed.
The buyer can file claims directly with the insurance provider, but in some cases, the seller may assist depending on the terms of the insurance policy.
Under CIP, the seller arranges transport to the final destination and must provide insurance (minimum 110% coverage). In contrast, CIF only covers transport to the port of arrival with limited maritime insurance.
Choose CIP when you want the buyer to handle import clearance, duties, and taxes. DDP is preferable when the seller manages the entire delivery process, including customs clearance.
CIP is ideal for multimodal shipments because the seller arranges comprehensive transport to the final destination and provides minimum insurance for the entire journey, simplifying logistics for the buyer.
In CIP, the seller handles export clearance while the buyer manages import clearance. With DDP, the seller takes care of all customs procedures, which may simplify the process for the buyer but could increase costs for the seller.
Although CIP requires a minimum insurance coverage of 110% of the cargo value, buyers can opt for additional coverage based on their risk assessment and the nature of the goods.
Common pitfalls include misinterpreting the risk transfer point and underestimating the buyer's responsibilities for import clearance and additional insurance needs. It is important for both parties to clearly define their obligations in the contract.
Typical documentation under CIP includes the commercial invoice, packing list, export license (if applicable), insurance certificate, and the bill of lading or airway bill to confirm transport arrangements.
Disputes under CIP terms are usually resolved through negotiation between the parties. If necessary, mediation or arbitration (as outlined in the contract) can be used to settle disagreements regarding responsibilities or claims.