"Carriage and Insurance Paid To" (CIP) is an Incoterm where the seller delivers the goods to a carrier and also pays for insurance and freight to a specified destination. The risk transfers to the buyer once the goods are handed over to the first carrier, making it unique as the seller must also procure insurance on the buyer's behalf.

CIP Definition and Scope

Under CIP, the seller is responsible for arranging and paying for transportation and insurance to ensure the goods reach the designated destination. The term can be applied to any form of transport, including multimodal solutions. It is particularly important in transactions where the buyer requires the seller to manage insurance and transport risks until the goods reach the agreed point.

Seller’s Obligations

  • Arrange and pay for transportation to the specified destination.
  • Obtain minimum insurance coverage until the first delivery point. This insurance should cover the buyer’s risk.
  • Clear the goods for export, providing all necessary documentation and adhering to all customs formalities.

Buyer’s Obligations

  • Assume all risks and any additional costs occurring after the goods have been handed over to the first carrier.
  • Handle further transportation and insurance from the first delivery point if required.
  • Manage any claims with the insurance company if issues arise during the transit covered by the insurance.

Risk and Cost Transfer Points

Risk transfers to the buyer as soon as the goods are handed over to the first carrier, although the seller pays for transportation and insurance to the destination. This makes it crucial for buyers to understand when they become responsible for the goods.

Benefits and Considerations

  • Benefits: Provides peace of mind for buyers as the seller arranges for transportation and insurance. It is particularly beneficial in international trade where transportation risks are significant.
  • Considerations: The buyer needs to be aware that the insurance provided by the seller may only cover the minimum required risk and may need to arrange additional coverage based on the goods' value and nature.

Common Scenarios

  • Suitable for high-value goods where transportation risks are a significant concern.
  • Often used when buyers are not familiar with the complexities of international shipping and insurance arrangements.