Incoterms CIP - Carriage and Insurance Paid To (2024)

FAQs

What is Incoterm CIP carriage and insurance paid to? ›

Carriage and Insurance Paid To (CIP) is an Incoterm where the seller is responsible for the delivery of goods to an agreed destination in the buyer's country, must pay for the cost of this carriage, and must take out maximum insurance cover for the buyer's risk.

The term "carriage and insurance paid to (CIP)" means the seller will pay freight and insurance when sending goods to the buyer or their representative at a location agreed upon by both parties. The seller must insure the goods for 110% of their contract value.

CIP (Carriage And Insurance Paid To) means that the seller is responsible for delivery, delivery costs, and insurance costs of the goods until they are transferred to the first carrier tasked with transporting the goods. Once this delivery takes place, the buyer takes on all responsibility.

Under CIF, the seller is responsible for covering the costs, insurance, and freight of the buyer's shipment while in transit. The buyer is responsible for any costs once the freight has reached the buyer's destination port.

Import. Incoterms. When goods are bought or sold "carriage paid" (CPT), this means that the seller delivers the goods to a destination agreed in advance between the seller and the buyer. It can also mean delivery to the buyer's preferred carrier.

In Carriage and Insurance Paid To (CIP), the seller assumes all risk until the goods are delivered to the first carrier at the place of shipment—not the place of destination. Once the goods are delivered to the first carrier, the buyer is responsible for all risks.

The seller is obligated to hand over any documents or information needed to enable the successful import, at the cost of the buyer. Import duties and taxes also need to be paid by the buyer. Same as with CPT, the Buyer is responsible for the goods as soon as they are loaded on the first carrier.

Under a CIP incoterm, the exporter is liable for freight and insurance coverage and costs to ship the goods from point A to point B, from where the first carrier takes over to load and ship the goods.

So, what is the main difference between CIF and CIP? The main difference between CIF and CIP is where the insurance and logistical responsibility for freight shifts. For CIF, it is the moment the freight reaches the dock of import. For CIP, it transitions more gradually to when delivery at buyer destination occurs.

Insurance Coverage: CIF requires the seller to provide insurance coverage for the goods but only at a minimum legal requirement level. CIP, on the other hand, mandates the seller to insure the goods for 110% of the contract value, providing more comprehensive coverage.

How to calculate insurance for CIF price? ›

To calculate CIF accurately, one must grasp three fundamental components: the cost of the goods, the expenses associated with insuring the goods, and the freight or shipping charges. The CIF value is calculated by the formula CIF = C+I+F.

Under CIF, the seller is responsible for transport up to the port of destination, export clearance and fees, and minimum insurance coverage up to the named port of destination. The insurance obtained must insure the goods to 110% of their value and provide necessary documentation to the buyer for any insurance claims.

Carriage Paid To refers to a freight agreement made between a buyer and and a seller in which both agree that the seller takes on the responsibility and cost of delivering the parcel to the carrier (or other recipient, as mutually agreed on by the parties).

With this ICC Incoterms® condition, the seller pays for transport and insurance to the said destination point, but the risk passes when the goods are transferred to the first transport. Terminal Handling Charges (THC) are fees charged by the terminal operator.

As discussed above, the buyer pays for insurance in CFR. He'll be liable for the goods right from the place of origin.

However, if the buyer chooses to buy insurance, it becomes their responsibility to pay for it. Destination terminal charges and delivery to destination: Upon arrival of cargo at the destination port, all the charges associated with the unloading, transferring, holding, etc., must be handled by the buyer.