Understanding Incoterms: CIP (Carriage and Insurance Paid To)

Carriage and Insurance Paid To (CIP) is one of the 11 Incoterms published by the International Chamber of Commerce (ICC). It defines the point at which responsibility for goods passes from the seller to the buyer.

In this article, we’ll explore what CIP means, how it benefits buyers and sellers and when you should use it.

What does Carriage and Insurance Paid To (CIP) mean?

Under Carriage and Insurance Paid To (CIP), the seller is responsible for delivering goods and paying transportation and insurance costs up to the buyer’s named destination.

The buyer assumes risk for damage or loss when the seller delivers goods to the first carrier. CIP is unique in that it separates risk transfer from cost transfer.

The seller must also provide insurance coverage for 110% of the contract value, ensuring protection against potential loss or damage during transit. Once they deliver goods to the first carrier, any additional risks or costs fall on the buyer.

You can use CIP for any transport mode, including road, rail, air, sea, or multimodal shipments. This flexibility makes it particularly suitable for non-containerised cargo and complex logistics chains.

What is the buyer responsible for under CIP?

Once the seller loads goods onto the first carrier, the buyer assumes responsibility for all of the risks and any costs not already paid for by the seller. A buyer’s obligations include:

• Paying for import duties, taxes and customs clearance at the destination.

• Arranging onward transportation from the named destination to their final location.

• Covering unloading costs at the final port or terminal.

• Ensuring additional insurance coverage beyond what is provided by the seller, if needed.

What is the seller responsible for under CIP?

The seller retains significant responsibilities under CIP until goods reach their named destination. A seller’s obligations include:

• Handling export customs formalities and obtaining necessary licenses.

• Paying for pre-carriage and main carriage transportation costs.

• Providing insurance coverage.

• Delivering goods to a designated carrier at an agreed location.

• Ensuring proper packaging and export marking of goods.

An example of shipping under CIP

Imagine a UK company buying bulk materials from China under the CIP Incoterm. Here’s how the process unfolds:

• The UK buyer names DP World London Gateway as the destination port in the sales contract. This means the seller pays for transportation and insurance up to the port, but the risk transfers to the buyer once the goods are on board the carrier in China.

• The seller handles all export formalities in China, including export licenses, customs documentation, and paying export duties and taxes. The seller ensures compliance with local regulations before the goods leave the country.

• The seller contracts a freight forwarder to manage transportation from China to the UK. The shipment involves multiple modes of transport: truck transport from the factory to a port in Shanghai and ocean freight from Shanghai to the UK.

• The seller purchases insurance covering 110% of the contract value. This insurance protects against risks such as loss or damage during transit. The policy is issued in favor of the buyer, meaning any claims will be payable directly to them.

• Once the seller loads goods onto the carrier in Shanghai, the risk transfers from the seller to the buyer. If anything happens to the goods after this handover — such as damage during ocean freight — the buyer must file an insurance claim.

• Once the goods arrive at London Gateway, the buyer assumes responsibility for import clearance. This includes obtaining necessary import licenses, completing customs documentation, and paying import duties and taxes.

• After clearing customs, the buyer arranges final delivery from the port to its logistics hub. At this stage, the buyer bears all costs and risks.

What are the benefits of CIP?

Shipping under CIP offers several advantages:

• Clear division of responsibilities. The seller handles transportation and insurance up to a named destination, while the buyer takes over once goods are on board the first carrier.

• Insurance coverage. The seller’s obligation to provide insurance protects goods during transit. Buyers also have the option of purchasing additional insurance.

• Flexibility in transport modes. Unlike CIF (Cost, Insurance, Freight), which applies only to sea freight, CIP is suitable for all modes of transport. This makes it ideal for multimodal shipments.

• Simplified logistics for buyers. Buyers don’t need to arrange transportation or insurance until after goods are on board the carrier.

CIP is also one of two Incoterms explicitly laying out responsibility for insurance — the other being CIF, or Cost, Insurance, Freight.

What are the potential issues with CIP?

Like any Incoterm, CIP has some drawbacks to be aware of:

• Risk transfer timing. Although the seller pays for insurance, risk transfers early under CIP, as soon as sellers deliver goods to the first carrier. Buyers must handle claims with the seller's insurer if there are issues during transit beyond this point.

• Limited insurance scope. While sellers must provide insurance coverage for 110% of contract value, buyers may find this insufficient for high-value goods or extended transit routes. The buyer must arrange additional coverage at their own cost.

If you want the seller to assume all risk throughout the shipment, DDP, or Delivered Duty Paid, may be a more suitable Incoterm.

CIP vs CIF: key differences

CIF, or Cost, Insurance, Freight, is a common alternative to CIP.

While CIP and CIF share similarities — like requiring sellers to pay freight and insurance — their differences lie in transport modes and risk transfer points:

CIP offers greater flexibility in transport modes and is better suited for modern logistics chains involving multimodal shipments. CIF is more restrictive but remains popular in traditional maritime trade scenarios.

What other Incoterms are there?

The International Chamber of Commerce (ICC) defines 11 Incoterms that allocate costs, risks and responsibilities between buyers and sellers in international trade. Here are some of the most commonly used Incoterms:

• EXW (Ex Works). The seller makes the goods available at their premises or another named location, such as a warehouse. The buyer assumes all costs and risks from that point onward, including transportation, insurance, and customs clearance.

• FCA (Free Carrier). The seller delivers the goods to a carrier or another party specified by the buyer at a named location. The seller covers transportation costs up to this point, but risk transfers to the buyer once delivery is made.

• CIF (Cost, Insurance, and Freight). The seller pays for transportation and insurance to the destination port but transfers risk to the buyer once goods are loaded onto the vessel at the port of origin.

• FOB (Free On Board). The seller delivers goods onto a vessel at the port of origin, covering all costs up to this point. Risk transfers to the buyer once the goods are loaded onto the ship.

• DAP (Delivered At Place). The seller covers all transportation costs and risks up to the buyer’s location but does not include import duties or taxes.

• DPU (Delivered At Place Unloaded). The seller delivers goods to a specified location and unloads them. The buyer takes responsibility from that point onward, including import duties and further transportation.

• DDP (Delivered Duty Paid). The seller assumes maximum responsibility by covering all costs, including transportation, insurance, import clearance, duties, and taxes, until goods reach the buyer’s location.

Get a CIP quote from the Far East with Pro Carrier

Carriage and Insurance Paid To (CIP) provides a balanced approach to international trade by dividing responsibilities between sellers and buyers while ensuring that goods are insured during transit. Its flexibility across transport modes makes it highly adaptable for modern logistics chains.

Navigating Incoterms like CIP can be complex, but with Pro Carrier, you have a trusted partner to guide you through the process. Our reliable international freight forwarding solutions are backed by innovative, industry-leading technology and exceptional customer service.

For example, Horizon, our all-in-one supply chain platform, offers complete visibility across your shipments. You also benefit from a proactive service that works two weeks ahead of schedule to overcome issues and accelerate customs clearance.

Speak to one of our experts today to learn how to ship from the Far East to the UK using CIP or another Incoterm.