CIP Carriage & Insurance Paid To Incoterms 2020 is the last Incoterm of the C group, a very peculiar category of Incoterms whose general principles we discussed in detail in our article How to deal with Group C Shipping Contracts.
Due to its flexibility, it is one of the most convenient Incoterms in the export & import business.
CIP: in between CIF and CPT
The CIP Incoterm stands for CIF as CPT stands for CFR. What does it mean? Let’s have a look at how CIP is written:
CIP Carriage & Insurance Paid To (named place of destination).
As per CPT, when the parties in an international sale contract agree to use CIP, they have to name the place of destination, in contrast with CFR and CIF that require the port of destination.
Therefore, under CIP the place of destination is the place where the goods must be physically delivered to the buyer; as we just wrote, that place may not be necessarily a port, but can an airport, a third party warehouse, or even the buyer’s premises.
Transfer of risk
As per any C-group Incoterms, also the CIP makes a distinction between the physical delivery, that we usually call transportation for the sake of avoiding confusion, and delivery as per the moment where the transfer of risk of loss or damage to the goods shifts from the seller to the buyer.
Accordingly, delivery takes place when the goods are collected by the first carrier that shows up at the seller’s premises to pick up the goods. At that moment, the seller is relieved from anything that might happen to the goods during their journey to the buyer.
However, transportation remains entirely on the seller, i.e. the seller must arrange and pay for transportation of the goods up to the place of destination mentioned in the contract.
Extensive insurance coverage
The big difference between the CIP and the CPT is that the CIP requires that the seller also provides insurance for the goods on behalf on the buyer, as it is the case with the CIF. Yet, the difference between the CIP and CIF is that the level of minimum insurance coverage required under CIP is much higher than the minimum insurance coverage mandated under CIF. Under the latter, insurance coverage is really minimal, covering nothing more than general average (Institute Cargo Clause C insurance).
The minimum insurance coverage requirement under CIP is the most extensive of the three standard clauses (Institute Cargo Clause A insurance).
As per the the CPT, and in contrast to the CIF, the CIP is not limited to waterway transport but can be used with any mode of transportation, whether it is airway, railway, or road transport.
Globartis Research
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