What is CIP? (Carriage and Insurance Paid To)

What Does CIP Stand For?

CIP stands for “Carriage and Insurance Paid To,” a term commonly used in international shipping contracts under the Incoterms (International Commercial Terms) rules published by the International Chamber of Commerce. This term denotes that the seller delivers the goods to a carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties). The seller must contract for and pay the costs of carriage necessary to bring the goods to the named destination. In addition, the seller pays for insurance covering the risk of loss of or damage to the goods during the carriage. The buyer, however, takes on all risks once the goods have been delivered into the custody of the carrier.

Comprehensive Explanation of Carriage and Insurance Paid To

“Carriage and Insurance Paid To” (CIP) is one of the trade terms used in the international shipping industry, which places certain responsibilities on both sellers and buyers.

1. Seller’s Responsibilities

• The seller is responsible for arranging and paying for the carriage and insurance of goods to a named destination.
• The seller must clear the goods for export, where applicable.
• The seller must also provide the buyer with the documents necessary to obtain the goods from the carrier.

2. Buyer’s Responsibilities

• Upon receipt of the goods from the carrier, the buyer assumes responsibility for any additional costs and risks.
• The buyer is responsible for any import duties, taxes, and other charges.
• The buyer must also arrange for any additional insurance if required, as the seller’s insurance is only required to cover minimum coverage.

3. Risk Transfer

• Risk is transferred from the seller to the buyer as soon as the goods are handed over to the first carrier, even if multiple modes of transportation (multi-modal) are involved.
• This transfer of risk occurs regardless of whether the goods have reached their final destination.

4. Advantages and Disadvantages

• Advantages for Sellers: Sellers control the main carriage and insurance, ensuring that goods are properly handled and insured while in transit.
• Disadvantages for Sellers: They bear significant costs until the goods are handed over to the first carrier.
• Advantages for Buyers: Buyers receive goods at an agreed location, insured and transported at the seller’s expense.
• Disadvantages for Buyers: They assume risk upon the goods’ transfer to the first carrier, possibly before the goods arrive at the final destination.

Notes to Importers

For importers using CIP terms, there are specific considerations that must be addressed to ensure smooth and efficient import processes.

1. Ensure Adequate Insurance

• Verify the level of insurance coverage provided by the seller and consider obtaining additional insurance for full coverage of the goods up to their final destination.
• Understand the terms of the insurance to ensure it meets your needs, especially in terms of risk coverage during all phases of the transportation.

2. Manage Risks Post-Delivery

• Since risk transfers at the point the goods are handed over to the first carrier, importers should plan for risk management throughout the remaining transit.

3. Cost Management

• Understand all potential costs involved after goods are delivered to the first carrier, including customs fees, taxes, and any additional transportation costs from the agreed point of delivery to your final destination.

4. Customs and Regulations

• Be prepared to handle customs clearance and ensure compliance with all local regulations and import requirements, which are the importer’s responsibility under CIP terms.

5. Logistics and Storage

• Coordinate with local carriers and warehouses to ensure that you can take delivery and store the goods effectively once they arrive at the named destination.

Sample Sentences Using “CIP” and Their Meanings

Here are some sample sentences using the term “CIP” along with their explanations:

1. “Our contract specifies CIP Los Angeles, so the seller will cover transportation and insurance to that point.”
   • Meaning: The seller is responsible for all transportation and insurance costs until the goods are delivered to Los Angeles, where the buyer then assumes responsibility.
2. “Please ensure that the CIP documentation is complete before dispatch.”
   • Meaning: It is essential that all documents required under the CIP agreement, including insurance and carriage contracts, are finalized before the goods are dispatched.
3. “The total cost calculated on a CIP basis includes both shipping and insurance up to the first carrier’s location.”
   • Meaning: The total cost under CIP terms includes all expenses for shipping the goods and insuring them up to the point where they are handed over to the first carrier.

Table of Other Meanings of “CIP”