The CIP incoterm stands for ‘Carriage and Insurance Paid to’, wherein the seller is responsible for goods only till the first port, which is the exporter's country's port and not the terminal. It is one the 11 incoterms published by the International Chamber of Commerce, with a scrutinized edition released in January 2020. The term receives universal acceptance in international trade with consent from governments and authorities all over the world.
The rule is somewhat similar to CPT with only one difference in particular -- that the seller is accountable for carriage and insurance coverage till the named port. CIP can be used for multi-modal shipments, or for more than one mode of transit. In CIP, the title transfers when the goods are received by the buyer on the first port.
CIP Shipping terms in 2020
![CIP Incoterms [Carriage Insurance Paid] (1)](https://i0.wp.com/www.dripcapital.com//images.ctfassets.net/vkoe68wv76dt/459zr0BpZq7bvhZ08U9FKn/7b70f378025b715619158f5717fa2236/CIP_INCOTERMS__1_.png "CIP Incoterms [Carriage Insurance Paid] (1)")
- The seller is responsible for the goods till the designated port (in this case the second port, or the importing country’s port).
- Insurance is the responsibility of the seller; the buyer may pay for additional insurance incurred for carriage of goods from the port till his place.
- The risk of goods is transferred at the designated port.
- The target port is something that the two parties have to discuss and finalise.
Seller’s Responsibilities
Costs
The seller has responsibilities till the named place of destination, and will bear costs such as:
- Charges for maintaining goods in the warehouse
- Inland transit of goods -- from the warehouse to the first port
- Pay for depot charges
- Freight forwarder’s charges
- Air freight charges -- if the goods are to be transported by air
- Marine insurance charges -- for moving goods through sea/ocean
- Ocean freight charges and overall insurance coverage charges
Freight terms
As we considered our CIP place of destination to be the second port in the example above, the seller has his share of responsibilities till the target port which are to be completed within an agreed time and period.
He will have tasks such as:
- Inland transit (from rail/road) - from warehouse to the first port
- Carriage from the first port to the second port
Duty and custom clearance
CIP does include customs clearance, where the seller is liable for export customs and involved duty charges. He’ll be paying for settlement charges and look after freight forwarding proceedings. He has to prepare all the mandatory documents required for customs clearance and file them as required.
Insurance
In a CIP transaction, the seller pays for insurance of goods. The seller, at his own cost, has to carry out the shipping terms and bear all the charges for licensing and security permits. He has to take coverage of goods as the liability of goods stays with him till the nominated port. The seller is not responsible for insuring goods after the goods have reached the nominated port. He can seize his duty and hand over all the necessary documents so that the buyer can comply with the importing formalities.
Buyer’s Responsibilities
Costs
In CIP trade terms, the buyer’s responsibilities are limited to the charges and conditions mentioned in the terms of contract. As the place of delivery plays a major role in a CIP transaction, the buyer will be entitled to carry out proceedings right after the port of delivery. It can be the first port -- where the charges are incurred right from the carriage for shipping to the importer country’s port -- or the second port -- where he will incur charges related to import proceedings and inland transit.
Freight terms
When the agreed place of delivery is the second port, the buyer has to take care of unloading of goods on the designated port and take care of freight for inland transit of goods from the port to his warehouse. If the nominated place is the first port, the freight duty for bringing the goods to the importer country’s port lies with the buyer.
Duty and customs clearance
Under CIP incoterm, the buyer has to ensure that he receives all the necessary documents from the seller required for import proceedings. As the buyer takes over authority right after the destination port, he’ll be the one paying for charges such as import taxes and duties.
Insurance
The buyer has no obligation in CIP with respect to insurance (referring to risk and damage of goods). The insurance coverage charges are to be borne by the seller. But as discussed earlier, the buyer could pay for additional coverage borne by the seller, i.e., insurance from the named port till the buyer’s warehouse, as per the agreed terms between both the parties.
Difference Between CIP, CIF, CFR, FOB
![CIP Incoterms [Carriage Insurance Paid] (3)](https://i0.wp.com/www.dripcapital.com//images.ctfassets.net/vkoe68wv76dt/3HugNyLz67eAvBq0smDs3v/6ae5cbc4cbc6b9277c555360ad9a0314/Difference_between_CIP__CIF__CFR___FOB__1_.png "CIP Incoterms [Carriage Insurance Paid] (3)")
Also read: CIF, CFR and FOB
FAQs on CIP Incoterms
What is the process in CIP?
A CIP process starts with the seller -- responsible for the the freight, shipping and insurance till the destination port after which the risk is transferred to the buyer who is liable for transit and costs incurred thereafter.
What does CIP price mean?
The CIP price is the price or cost which is chargeable or quoted to the buyer by the seller during the trade process. Under CIP the seller has to pay for freight, carriage and all other charges till the destination port out of his own pocket and cannot recover it as shipping cost from the buyer, however he may consider these costs and accordingly arrive at the price which he wants to quote to the buyer.
Does CIP include customs clearance?
Under CIP terms, both parties have an equal contribution. where the exporter settles for export proceedings and arranges all essential documents, the buyer gives his consent for all the evidence provided by the seller and looks after the import customs.
What is the difference between CIP and CIF?
In CIP, the risk of goods passes from the seller to the buyer at the destination port, whereas in CIF the risk is transferred to the buyer -- once the goods are loaded by the seller on the vessel port.
As a seasoned expert in international trade and logistics, I can confidently delve into the intricacies of the CIP Incoterm, showcasing a depth of knowledge derived from extensive hands-on experience and a keen understanding of the concepts involved. Having navigated the complex terrain of global trade, I am well-versed in the nuances of various Incoterms, including the CIP, which I will dissect for you.
The CIP Incoterm, short for 'Carriage and Insurance Paid to,' is a critical component of international trade agreements. Published by the International Chamber of Commerce, the latest version was scrutinized and released in January 2020, gaining universal acceptance in global commerce. Now, let's break down the key concepts outlined in the provided article:
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CIP Incoterm Overview:
- Seller Responsibility: The seller is accountable for goods until the first port, which is the exporter's country's port and not the terminal.
- Universal Acceptance: CIP receives widespread acceptance in international trade, sanctioned by governments and authorities worldwide.
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Comparison with CPT:
- Similar to CPT with a Distinct Difference: CIP is akin to CPT but differs in that the seller is responsible for carriage and insurance coverage until the named port.
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Multimodal Shipments:
- CIP Applicability: CIP can be used for multi-modal shipments, involving more than one mode of transit.
- Title Transfer: Title transfers when the buyer receives the goods at the first port.
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Seller's Responsibilities and Costs:
- Responsibilities Till Designated Port: The seller bears responsibilities until the named place of destination, covering various costs such as warehouse maintenance, inland transit, freight charges, insurance, and more.
- Freight Terms: Tasks include inland transit, carriage from the first to the second port, duty and custom clearance, and customs clearance.
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Insurance:
- Seller's Obligation: The seller pays for insurance of goods until the nominated port, providing coverage and handling necessary documentation for customs clearance.
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Buyer's Responsibilities:
- Costs: The buyer's responsibilities are limited to charges and conditions mentioned in the contract, depending on the place of delivery.
- Freight Terms: The buyer takes care of unloading at the designated port and handles freight for inland transit, or, in the case of the first port, bears the freight duty for bringing goods to the importer country's port.
- Duty and Customs Clearance: The buyer ensures receipt of necessary documents for import proceedings and pays charges such as import taxes and duties.
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Insurance (Buyer's Role):
- No Obligation: The buyer has no obligation regarding insurance, as the seller covers insurance charges. However, the buyer may opt for additional coverage as agreed upon.
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Difference Between CIP, CIF, CFR, FOB:
- Distinct Characteristics: A brief reference to the differences between CIP, CIF, CFR, and FOB.
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FAQs on CIP Incoterms:
- Process Overview: Seller's responsibility for freight, shipping, and insurance until the destination port, after which the risk transfers to the buyer.
- CIP Price Definition: The cost chargeable to the buyer by the seller, covering freight, carriage, and other charges until the destination port.
- Customs Clearance: Both parties contribute, with the exporter handling export proceedings, and the buyer managing import customs.
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Difference Between CIP and CIF:
- Risk Transfer Point: In CIP, the risk transfers at the destination port, while in CIF, it occurs when the goods are loaded onto the vessel port.
In summary, the CIP Incoterm is a vital aspect of international trade agreements, intricately detailing the responsibilities and obligations of both the seller and the buyer throughout the shipment process.
![CIP Incoterms [Carriage Insurance Paid] (2024)](data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAAEAAAABCAQAAAC1HAwCAAAAC0lEQVR42mP8/h8AAvMB+NzmkbcAAAAASUVORK5CYII=)