CIP Incoterms (Carriage and Insurance Paid To)
CIP simplifies global transactions by clearly outlining who handles transportation costs and insurance coverage. Under this arrangement, the seller pays for carriage and insurance to deliver goods to a carrier or designated location, making CIP attractive for balanced risk management.
At First Carrier
Any Mode
110% Coverage
What Are CIP Incoterms?
CIP (Carriage and Insurance Paid To) represents one of the 11 Incoterms® 2020 rules published by the International Chamber of Commerce (ICC). Under CIP terms, the seller arranges and pays for both transportation and insurance coverage to deliver goods to a carrier or agreed location.
The seller fulfills their delivery obligation when they hand over the goods to the first carrier, not when the goods reach the destination. Risk transfers from seller to buyer at this point of delivery, even though the seller continues paying for transportation and insurance.
CIP applies to all transport modes including multimodal shipments. This flexibility makes CIP suitable for containerized cargo, air freight, road transport, and any combination of transportation methods.
Key Components of CIP:
- Transportation Costs: Seller pays all freight charges to named destination
- Insurance Coverage: Seller purchases cargo insurance covering 110% of contract value
- Risk Transfer Point: Risk passes when goods reach the first carrier
- Named Place: Specific destination where seller's cost obligations end
Insurance Requirements in CIP
Minimum Coverage (110% of Contract Value)
CIP requires sellers to provide Institute Cargo Clauses (A) or equivalent all-risk coverage. The policy names the buyer as beneficiary and remains valid throughout the entire journey.
Protection during handling and transport
Coverage against theft during transit
Weather-related incidents and acts of God
Contribution to general average and salvage charges
If included in the insurance policy terms
Additional Insurance Options
Buyers may require coverage beyond the minimum 110% for high-value cargo, temperature-sensitive goods, or shipments through high-risk regions.
| Coverage Type | Cost Addition |
|---|---|
| Consequential Loss Covers indirect losses from delays | 5-10% of base premium |
| Temperature Control Protects perishable goods | 15-20% of base premium |
| Rejection Insurance Covers buyer rejection risks | 10-15% of base premium |
| Extended Storage Protects during warehouse delays | 8-12% of base premium |
Key Responsibilities Under CIP Terms
Seller's Obligations
The seller arranges transportation, provides comprehensive insurance, handles export clearance, and delivers goods to the first carrier.
Buyer's Obligations
The buyer bears risk from first carrier onwards, handles import formalities, and arranges final delivery from the named destination.
Advantages and Disadvantages of CIP
Advantages
Comprehensive Insurance Protection
Buyers receive 110% contract value coverage with Institute Cargo Clauses (A), the broadest protection available without arranging insurance themselves.
Simplified Logistics for Buyers
Sellers manage entire transportation chain and insurance procurement, allowing buyers to focus on core business activities.
Cost Transparency
Single-price quotations include goods, transportation, and insurance, making budget planning straightforward with predictable costs.
Multimodal Flexibility
CIP applies to all transport modes—sea, air, road, rail, and combinations—unlike CIF which only covers maritime transport.
Disadvantages
Limited Logistics Control for Buyers
Buyers sacrifice direct oversight of carrier selection and routing decisions, depending entirely on seller's choices.
Early Risk Transfer
Risk transfers at first carrier handover even though seller pays for transport. Damage during transit becomes buyer's responsibility.
Insurance Claim Complexity
Disputes after risk transfer require coordination between multiple parties, potentially delaying settlements by 30-60 days.
Currency Exchange Risks
Transportation and insurance cost fluctuations can impact profitability by 2-5% on international transactions.
CIP vs Other Incoterms
| Aspect | CIP | CIF | CPT | DAP |
|---|---|---|---|---|
| Transport Modes | All modes | Sea/inland waterway only | All modes | All modes |
| Insurance Level | 110% (Clause A) | 110% (Clause C) | None required | None required |
| Risk Transfer | First carrier | Ship's rail | First carrier | At destination |
| Delivery Point | Named destination | Port of destination | Named destination | Named destination |
| Insurance Beneficiary | Buyer | Buyer | N/A | N/A |
CIP vs CIF
Both require seller-provided insurance, but CIP applies to all transport modes while CIF is sea/inland waterway only. CIP mandates comprehensive Institute Cargo Clauses (A) coverage; CIF uses more limited Clause (C). CIP offers greater flexibility for containerized and multimodal shipments.
CIP vs CPT
CIP builds upon CPT by adding mandatory insurance coverage. Both share identical risk transfer and cost allocation structures. The insurance component in CIP typically adds 0.5-2% to total shipping costs. Use CPT when buyers prefer arranging their own insurance.
When to Use CIP Incoterms
Ideal Scenarios for CIP
- High-value shipments like electronics, machinery, or pharmaceuticals
- Multimodal transportation requiring seamless carrier coordination
- Buyers lacking logistics expertise who want insurance included
- Time-sensitive deliveries where seller has established carrier relationships
- Containerized cargo, air freight, or road transport shipments
Consider Alternatives When
- Buyer wants to retain risk until destination (use DAP or DDP)
- Sea-only shipments where CIF may be more standard
- Buyer prefers arranging own insurance coverage (use CPT)
- Low-value goods where insurance cost outweighs benefit
- Buyer wants to select their own carriers (use FCA)
Industries Commonly Using CIP
Technology
35% of CIP transactions
Pharmaceuticals
70% vaccine exports
Automotive
60% parts suppliers
Textiles
45% Asian suppliers
Machinery
$250K+ equipment
Common Mistakes to Avoid with CIP
Misunderstanding Risk Transfer Points
Many sellers incorrectly assume risk remains with them until the named destination. Risk transfers when goods reach the first carrier, not the final destination.
Inadequate Insurance Documentation
Failure to deliver insurance certificates to buyers before cargo handover creates problems during claims processing. Always name the buyer as beneficiary explicitly.
Incorrect Cost Calculations
Sellers often underestimate total CIP obligations. Include terminal handling charges, documentation fees, insurance premiums (0.5-2% of shipment value), and carrier surcharges.
Ambiguous Destination Naming
Vague descriptions like "New York area" create disputes. Specify exact addresses: "JFK Airport, Terminal 4" or "HHLA Container Terminal Altenwerder, Hamburg."
Mixing CIP with Other Incoterms
You cannot combine CIP obligations with terms from other Incoterms. Each Incoterm stands alone—use CPT if you don't want insurance, or DAP for extended seller risk.
Frequently Asked Questions
Need Help with CIP Shipments?
Our freight experts can help you navigate CIP terms and manage your international shipments from China with comprehensive insurance coverage. Get a quote today.
delivered
countries
response