Carriage And Insurance Paid To (CIP)

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DEFINITION

A commercial term indicating that the seller delivers the goods to a carrier or to another person nominated by the seller, at a place mutually agreed upon by the buyer and seller, and that the seller pays the freight and insurance charges to transport the goods to the specified destination. “Carriage and Insurance Paid to” (CIP) means that although the seller pays for freight and insurance, the risk of damage or loss to the goods being transported is transferred from the seller to the buyer as soon as the goods have been delivered to the carrier. While the seller is responsible for insuring the shipment, this obligation only extends to the minimum level of insurance coverage. If the buyer desires additional insurance, such extra coverage will have to be arranged by the buyer.

INVESTOPEDIA EXPLAINS

The term CIP is typically used in conjunction with a destination. So for example, CIP New York would mean that the seller will pay freight and insurance charges to New York.

As is the case with “Carriage Paid To” (CPT), carriage or freight charges with CIP refer to transportation charges for any accepted transport mode such as road, rail, sea, inland waterway or air, or multimodal transport that involves a combination thereof. In the case of multimodal transport – for example, road and then sea – the risk is transferred from the seller to the buyer as soon as the goods have been delivered to the first carrier.

Since the seller’s obligation is to provide only the minimum amount of insurance coverage to the destination, the buyer should arrange for additional coverage that protects the shipment from all risks. Otherwise, the buyer can be saddled with huge losses if the shipment is damaged or lost through some adverse event that is not covered by the minimal insurance coverage provided by the seller. The buyer also has the option to ask the seller to provide extra insurance coverage, and – depending on the relative bargaining positions of the buyer and seller – can negotiate for the seller to bear part of the cost of such additional insurance.

CIP is one of the 11 international commercial terms (Incoterms) specified by the International Chamber of Commerce in the latest revision (Incoterms 2010) of these globally accepted trade terms.


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