CIP Meaning: Carriage and Insurance Paid To Explained

What does CIP mean for a buyer?

CIP separates the destination covered by the seller’s carriage payment from the earlier delivery point where cargo risk transfers.

It can be used for any transport mode or combination of modes.

Specify the destination precisely. For the underlying delivery rule, see the ICC materials and DHL summary listed in Sources.

Who pays and who carries risk at each stage?

This table summarises the normal contractual allocation. Paying a charge and bearing cargo risk are separate responsibilities.

Export formalities remain the seller’s responsibility after carrier handover. The table assumes normal performance; CIP also provides for earlier risk transfer if the buyer fails to give a required dispatch notice and the goods are clearly identified to the contract.

Where exactly does risk transfer?

Delivery to the seller’s contracted carrier transfers risk. With successive carriers and no agreed delivery point, the default is delivery to the first carrier.

Record both the carrier handover point and the paid destination. Request evidence of handover.

Agree ownership, payment and remedies for defective goods separately: Incoterms do not determine these.

What insurance must the seller provide?

CIP normally requires Institute Cargo Clauses (A), or similar cover appropriate to the transport mode, unless otherwise agreed or customary in the trade. CIF defaults to Clauses (C).

Clauses (A) provide all-risks cover subject to exclusions. Request the wording, any deductible and claims instructions.

Insurance must cover at least 110% of the contract price, in the contract currency, from delivery to at least the named destination. The seller must supply insurance evidence; cover must permit the buyer or another person with an insurable interest to claim directly.

Requested additional war or strikes cover is at the buyer’s cost if obtainable and not already included, subject to the buyer supplying necessary information.

Who handles export and import clearance?

The seller handles export clearance; the buyer handles applicable transit and import formalities and associated duties and taxes. Transit costs allocated to the seller by its carriage contract remain the seller’s expense.

Before ordering, confirm who will prepare the import declaration and which documents are required.

When should you use CIP, and when should you choose another term?

Consider CIP if you accept early risk transfer and want the supplier to arrange carriage and insurance. Check your ability to manage clearance and claims.

Compare CPT for carriage without compulsory seller-arranged insurance, or FCA for buyer-arranged main carriage.

Compare DAP for seller risk until destination before unloading, DPU for seller risk through unloading, and DDP for seller-managed import clearance and applicable import taxes.

Compare CIF for sea or inland-waterway transport. Use the Incoterms chart alongside the applicable rules.

China example: paid delivery to a warehouse, early transfer of risk

Hypothetical example: a Shenzhen supplier sells components CIP to a specified overseas warehouse, Incoterms 2020, with first-carrier handover agreed at the factory.

The supplier pays carriage and insurance to the warehouse; risk passes at that handover. The buyer handles applicable import formalities and taxes.

For damage after handover, preserve photographs, packaging and transport records, and follow the policy’s claims instructions. Check unloading charges before shipment.

UK example: do not count freight and insurance twice

For Great Britain imports valued under HMRC’s transaction-value method, include transport, insurance, loading and handling to the UK border without adding costs already included in the price. Post-border delivery charges may be deducted if separately shown.

Import VAT valuation starts with customs value and adds applicable import duties and other import charges, excluding VAT itself, plus relevant incidental expenses not already included. These extend to the first UK destination and a further UK destination known at importation. Ask your agent to reconcile the invoice with HMRC’s guidance.

For other markets, check local customs valuation rules.

What should you check before accepting a CIP quote?

Record the destination, handover point, route, insurance evidence, unloading charges and exclusions. Agree who will help gather claim evidence.

Specify product requirements, acceptance checks, payment and ownership separately.

For the wider framework, read Incoterms explained.

Sources

Sources: ICC’s rules and introduction for contractual obligations; ICC Academy commentary and DHL’s summary for explanation; HMRC guidance for UK valuation. Academy articles express their authors’ views. Apply the agreed contract and applicable law.