What Is Carriage and Insurance Paid To?

Carriage and Insurance Paid To (CIP) is an international commercial term (Incoterm) used in global trade to define the responsibilities of sellers and buyers during the transportation of goods. Introduced by the International Chamber of Commerce (ICC), CIP is one of the standardized terms in the Incoterms 2020 framework and is primarily used in contracts for the international shipment of goods.

Overview of CIP

Under a CIP agreement, the seller is responsible for delivering the goods to a carrier or another person nominated by the seller at an agreed place. In addition to covering the cost of carriage to the named destination, the seller must also procure insurance coverage against the buyer’s risk of loss or damage to the goods during transport. Importantly, while the seller arranges and pays for transport and insurance, the risk transfers from seller to buyer once the goods are handed over to the first carrier.

CIP is versatile and can be used with any mode of transport, including air, road, rail, sea, or a combination of these.

Key Responsibilities

Seller’s Obligations

The seller must:

• Deliver the goods to a carrier at a mutually agreed point and pay the cost of transporting the goods to the destination named in the contract.
• Obtain insurance coverage for the goods during transit, meeting at least the minimum coverage defined under Clause A of the Institute Cargo Clauses (2020 Incoterms standard raised the coverage requirement from Clause C to Clause A).
• Provide the buyer with necessary transport and insurance documents so the buyer can take delivery of the goods.
• Ensure that the goods are suitably packed and labeled for export and transportation.

Even though the seller pays for transportation and insurance, risk is passed to the buyer when the goods are handed over to the first carrier, not when they arrive at the destination.

Buyer’s Obligations

The buyer is responsible for:

• Assuming the risk of loss or damage once the goods are handed to the carrier.
• Taking delivery of the goods at the named destination and completing import customs clearance, including paying any import duties or taxes.
• Filing any claims under the insurance policy provided by the seller in the event of loss or damage during transit.

Risk and Cost Allocation

One of the most important distinctions in CIP is the separation of cost and risk. While the seller covers the cost of freight and insurance up to the named place of destination, the buyer assumes the risk at the point of delivery to the first carrier. This is a critical aspect for buyers to understand, especially when negotiating delivery terms or considering whether to ask for higher insurance coverage beyond the default minimum required.

To further clarify: although the seller procures insurance, the policy is for the benefit of the buyer. Therefore, if a loss occurs in transit, the buyer must pursue the claim against the insurance, not the seller.

Comparison with Other Incoterms

CIP is often compared with Cost, Insurance and Freight (CIF), another Incoterm that includes insurance. However, CIF is used exclusively for maritime transport, while CIP is applicable to all transport modes. CIF also defines risk transfer at the point the goods are loaded on the vessel, whereas CIP transfers risk at the time of delivery to the first carrier.

In contrast to Carriage Paid To (CPT), which also obligates the seller to pay for transportation but not insurance, CIP adds the requirement for the seller to provide insurance coverage. This distinction makes CIP more protective of the buyer’s interests during shipment.

Practical Considerations

When using CIP in a trade contract, both parties should clearly specify the place of delivery and the destination. For example, “CIP Frankfurt Airport” would mean the seller covers carriage and insurance to Frankfurt Airport, but the buyer assumes risk once the goods are delivered to the first carrier—possibly even before they reach the airport.

The buyer should also verify the scope and terms of the insurance obtained by the seller. Although Clause A insurance offers broad coverage, it may still include exclusions that the buyer should be aware of, such as war, strikes, or improper packing. In some cases, the buyer may want to negotiate additional insurance or supplementary coverage.

The Bottom Line

Carriage and Insurance Paid To (CIP) is an Incoterm that balances shared responsibilities between buyer and seller in international trade. The seller handles export, transportation, and insurance costs to the named destination, while the buyer assumes risk once the goods are handed over to the first carrier. This term offers convenience and predictability in multi-modal transport but requires careful coordination on insurance coverage and risk management. Understanding CIP helps ensure that both parties align on expectations, documentation, and the moment risk is transferred.