Incoterm – Carriage and Insurance Paid To (CIP)
When using Carriage and Insurance Paid To (CIP), the seller bears liability until the goods are handed over to the initial carrier at the shipment location, not the destination. Following this transfer, all risks become the buyer’s responsibility.
Nevertheless, the seller must cover the carriage expenses and provide comprehensive insurance until the cargo reaches the specified destination point.
A carrier refers to any entity handling the transportation of goods, such as shipping lines, airlines, trucking firms, railways, or freight forwarders. In cases involving various modes of transportation, the shipment’s origin is the location of the first carrier employed.
Similar to CPT, but with the seller responsible for procuring comprehensive insurance coverage.
Choosing Carriage and Insurance Paid To
- If the buyer is new to international trade and wants a structed shipping and insurance framework.
- If the supply chain involves various transportation methods.
- If the buyer has a higher budget and prefers seller-managed transportation and insurance.
Understanding the Responsibilities
Seller’s Responsibilities: Under CIP, the seller’s primary responsibilities are listed as follows:
Packaging
The seller must prepare the goods according to different origin's export packaging standards.
Carriage Loading Charges
When the goods depart from the seller's site, the seller is responsible for expenses encompassing any charges related to placing the cargo onto the initial carrier for its journey to the export location.
Delivery Charges
The seller is responsible for transporting goods to the agreed export location, including the fees involved in the process.
Duties, Taxes, and Custom Clearances
The seller is responsible for the export procedure, including the documentation preparation, expenses, and other examination processes.
Transportation Charges
The seller is responsible for the inland expenses from the seller's premises to the carriage, including costs like loading onto the truck.
Carriage Charges
The seller is responsible for covering all freight costs, specifically from the port of origin to the destination.
Terminal Charges
The seller is responsible for both origin and destination terminal charges.
Insurance
The seller is responsible for providing insurance to ensure the safety of the shipment.
Buyer’s Responsibilities: Once the seller have completed their obligations, buyer’s responsibilities are as follows:
Duties, Taxes, and Custom Clearances
The buyer is responsible for the import procedure, including the documentation preparation, expenses, and other examination processes.
Unloading Charges
The buyer must cover charges for unloading at the destination from the final carrier.
Transportation Charges
The buyer is accountable for the transportation charges from the point of the destination port to the final stop.
Pros and Cons for Buyers
Risk Coverage
The buyer benefits from all-risk insurance coverage arranged by the seller, protecting against various perils during transit.
Peace of Mind
CIP offers security and simplicity as the seller handles transportation, insurance, and logistics, reducing the buyer's involvement.
Expertise Utilization
Buyers can leverage the seller's shipping and logistics expertise, especially when dealing with complex international shipments.
Multimodal Flexibility
CIP is suitable for multimodal shipments, allowing flexibility in choosing transportation modes.
Higher Costs
Buyers may face higher costs due to insurance and transportation fees embedded in the purchase price.
Limited Control
Buyers have less control over the shipping process as the seller manages logistics, potentially leading to inefficiencies.
Unknown Carriers
Unless specified, buyers may not know the carriers involved, making it challenging to track and coordinate shipments.
Complex Letter of Credit
Using CPT in Letter of Credit (LC) payments can lead to complexities and potential delays, affecting payment processes.
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