CIP Incoterms 2020 : A Few Quick Points
- Carriage and Insurance Paid To (CIP) Incoterms can be used for all modes of transport and even when there are multiple modes of transport involved in transportation.
- Risk transfers from seller to buyer when the carrier collects the cargo
- The seller must arrange for carriage to the agreed destination (named place)
- The seller must pay for insurance costs to the agreed destination (named place).
- Insurance cover must be 110% of the contract value.
- The seller must pay for transport costs to the agreed destination (named place)
When CIP is used in a contract, the named place is mentioned. For example, if a company in Singapore is selling on CIP terms to a company in India and the seller has agreed to pay for transportation to the port in India – the sales contract should at least mention:
CIP (Chennai Port, India, Incoterms 2020)
Shipping CIP Incoterms: Delivery & Transfer of Risks
Delivery happens when the seller hands over the cargo to the first carrier. In most instances this would mean that the delivery takes place when the cargo is handed over at the seller’s warehouse, when the arriving truck to collect the cargo takes control of the goods. It must be noted that the point of delivery is not mentioned in the Incoterm, hence it is highly advisable to define the point of delivery as accurately as possible in the sales contract, as there may be conflicts in understanding between first carrier and/or main carrier.
… highly advisable to define the point of delivery as accurately as possible in the sales contract, as there may be conflicts in understanding …
Shipping CIP Incoterms: Insurance
The seller must purchase insurance for buyer’s benefit in case of damage or lose of cargo. The insurance cover must meet the requirements defined in Institute Cargo Clauses (A). It must be noted that the insurance coverage required under CIP is higher than the cover required under CIF.
Shipping CIP Incoterms: Carriage
The seller must arrange and pay for carriage from the point of delivery to the named place of the destination. The seller must abide by laws and meet all obligations relating to transport security regulations.
Shipping CIP Incoterms: Customs clearance
The seller must meet the obligations of export Customs clearance and the buyer must manage import Customs clearance. This would mean that respective parties responsible for export/import have to manage and pay for all formalities like licenses, security checks, inspections and other document submissions as required.
Shipping CIP Incoterms: Delivery/transport documentation
The seller must provide the buyer with related transport documents. The costs of providing such documents, original or otherwise will be paid for by the seller.
Shipping CIP Incoterms: Packaging & Marking
Seller must ensure and pay any costs related with ensuring that the cargo is delivered in acceptable condition. This would mean the seller has to pay for quality checks, weighing operations and/or counting etc. The seller must package the goods at the seller’s cost.
Shipping CIP Incoterms: Cost allocations
The allocation of costs between buyer and seller are as follows:
- Any additional insurance cover requested
- Any costs involved in obtaining documents for import clearance
- Duties, taxes and other costs related to import
- Any costs incurred due to a failure to give reasonable notice to seller when it is agreed that the buyer is allowed to choose the time for departure from origin or receiving at destination
- Transport and insurance costs to the named place
- Transport security related costs
- Cost of providing usual proof of delivery
- Duties, taxes and other costs related to export
- Any costs involved in obtaining documents for export clearance
Shipping CIP Incoterms: Notices
- The seller must use the usual methods to notify the buyer that delivery has been made
- The buyer must give the seller enough notice time to deliver the cargo at the buyer’s chosen time (if agreed that the buyer can choose the time)
What is the difference between CIP & CIF Incoterms?
The above is a common question that arises when traders decide on Incoterms.
The 2 major difference between these Incoterms are:
- CIP can be used for any mode of transport while CIF can only be used for transport by sea or inland waterway
- The insurance cover required in CIP is more extensive then the cover required by CIF
We have a more comprehensive article on Incoterms 2020 that you can find here.