CIP (Carriage and Insurance Paid To) is the Incoterms 2020 rule under which the seller delivers the goods to the first carrier at the agreed place and pays the freight and insurance in favour of the buyer up to the named destination. Risk passes to the buyer when the goods are handed over to the first carrier. Insurance must be at least at ICC (A) level and for 110 percent of the contract value.
How are costs and risk divided under CIP?
CIP belongs to the C group in the Incoterms groups. What the rules in this group have in common is that, although the seller pays for the main carriage, risk passes to the buyer earlier, in the country of shipment. Under CIP, the seller delivers the goods to the first carrier; from that moment, loss of or damage to the goods in transit is at the buyer's risk. This is why the insurance the seller must take out protects the buyer's risk. Apart from insurance, the rule is the same as CPT.
| Obligation | Seller | Buyer |
|---|---|---|
| Export customs clearance | Yes | No |
| Freight to the destination | Yes | No |
| Cargo insurance | Yes, at ICC (A) level | At own cost if additional cover is required |
| Risk during the journey | Until delivery to the first carrier | After delivery |
| Import customs clearance and duties | No | Yes |
How did Incoterms 2020 change the insurance requirement?
Under Incoterms 2010, the minimum cover for CIP and CIF was Institute Cargo Clauses (C). In its 2020 revision, the International Chamber of Commerce (ICC) separated CIP: under CIP, the seller must now provide ICC (A) or similar all-risks cover. Under CIF, ICC (C) remained the default level. Clause (A) covers all risks except the listed exclusions, while (C) covers only the listed major casualties; this difference between the ICC (A), (B) and (C) clauses shows why the change matters to the buyer. The other conditions are:
- The sum insured is at least 110 percent of the contract price and is in the currency of the contract.
- Cover runs from the point of delivery to at least the named place of destination.
- The seller provides the buyer with the policy or insurance certificate; the buyer must be able to claim directly from the insurer.
- Additional cover such as war, strikes and riots is added if the buyer requests it and pays for it.
- The parties may agree a lower level of cover by stating it expressly in the contract.
For which cargo is CIP preferred?
CIP suits all modes of transport and multimodal transport. It is recommended instead of CIF for containerised and palletised cargo and for shipments other than by sea or combining more than one mode. In letter-of-credit sales, banks often require an insurance document; CIP ensures this document is arranged by the seller. For high-value machinery and project equipment, ICC (A) level is an important safeguard for the buyer. Even so, ICC (A) does not cover insufficient packing, delay or losses arising from the inherent nature of the goods; for heavy cargo, packing and stowage specifications should be written separately. In project shipments, choosing between CIP, DAP and FCA is the central question in selecting the delivery term for project cargo.
What is the difference between CIP, CPT and CIF?
| Rule | Mode of transport | Seller's insurance obligation | Where risk passes |
|---|---|---|---|
| CPT | All | None | Delivery to the first carrier |
| CIP | All | ICC (A), 110 percent | Delivery to the first carrier |
| CIF | Sea and inland waterway | ICC (C), 110 percent | Loading on board the vessel |
Common mistakes
- Stating the place vaguely (such as “CIP Mersin”); the destination address or terminal should be clearly specified.
- Calculating the sum insured on the FOB value.
- Accepting the seller's ICC (C) policy without insisting on the 2020 requirement.
- The buyer taking out a separate policy of its own and insuring the same risk twice.
The clauses and sum insured of the policy the seller arranges can be checked under cargo transport insurance.