CIP Incoterms 2020: Carriage and Insurance Paid To
Under CIP the seller pays the transport and all risks cargo insurance to the named destination. Risk passes to the buyer when the goods are handed to the first carrier.
CIP Carriage and Insurance Paid To
Any mode of transport
| Step | CIP |
|---|---|
| Export packing and marking | Seller |
| Loading at the seller's premises | Seller |
| Export customs clearance | Seller |
| Transport to the port or terminal | SellerRisk passes to the buyer here |
| Terminal charges and loading at origin | Seller |
| Main carriage (ocean or air freight) | Seller |
| Cargo insurance | Seller |
| Unloading at destination terminal | Buyer, unless in the freight contract |
| Transport to the named place | Seller, to the named place |
| Unloading at the named place | Buyer |
| Import clearance, duties and taxes | Buyer |
- CIP
- Risk passes: When the goods are handed to the first carrier, at origin.
- Costs: The seller pays carriage and all risks insurance (Institute Cargo Clauses A, 110% of value) to the named place of destination.
What does CIP mean?
CIP (Carriage and Insurance Paid To) means the seller hands the goods to the first carrier, pays the transport to the named place of destination, and buys cargo insurance that protects the buyer for the journey. Risk passes to the buyer at the first carrier, at origin. CIP works for any mode of transport.
CIP insurance requirements in Incoterms 2020
Incoterms 2020 raised the cover under CIP. The seller must now insure on Institute Cargo Clauses (A), all risks, or similar, for at least 110% of the contract price, in the contract currency, covering the goods from delivery to at least the named place. The seller gives the buyer the policy or certificate so the buyer can claim directly. The parties can agree a lower level of cover, but they must say so in the contract. Under CIF the minimum is still the narrower Clauses (C).
Seller and buyer obligations under CIP
| Seller | Buyer |
|---|---|
| Contracts and pays carriage to the named destination | Bears the risk from delivery to the first carrier |
| Buys all risks insurance (Clauses A, 110%) and hands over the policy | Claims on the policy if goods are lost or damaged in transit |
| Clears export and pays export fees | Pays unloading at destination unless in the carriage contract |
| Provides the transport document and commercial invoice | Clears import and pays duties and taxes |
Example
A German machine builder sells a packing line "CIP Buyer's plant, Pune, India, Incoterms® 2020" for EUR 400,000. The builder hands the crates to its forwarder in Stuttgart, pays air and road transport to Pune, and insures the shipment on all risks terms for EUR 440,000. A crate is damaged on the truck in India: the risk was the buyer's, and the buyer claims under the builder's policy.
When to use CIP
- Manufactured and high value goods shipped by air, container or multimodal transport.
- Letters of credit that require the seller to present an insurance document.
- Buyers who want the seller to handle transport and insurance in one price.
If the buyer prefers to insure itself, choose CPT. If the seller should also carry the risk to destination, look at DAP.
Whatever the rule, the seller provides a commercial invoice that names the Incoterm and place, and usually a packing list. For quotes before the order, use a proforma invoice with the same rule written on it.
Features
- Who does each step under CIP
- Where risk passes, marked on the chart
- Compare CIP with CIF or any other rule
- Link to the Incoterms chooser
Frequently asked questions
What does CIP mean in Incoterms?
CIP means Carriage and Insurance Paid To. The seller pays the transport and buys cargo insurance to the named destination, while the risk passes to the buyer at the first carrier.
What insurance is required under CIP?
Since Incoterms 2020, all risks cover under Institute Cargo Clauses (A) or similar, for at least 110% of the contract price, unless the parties agree a lower level.
What is the difference between CIP and CIF?
CIP works for any mode, passes risk at the first carrier and requires all risks cover. CIF is for sea and inland waterway only, passes risk on board and requires only minimum Clauses (C) cover.
Who bears the risk during transport under CIP?
The buyer. That is why the seller must provide insurance in the buyer's favour.
Can CIP be used for air freight?
Yes. CIP works for air, road, rail, sea and multimodal transport.