Glossary term
Carriage and Insurance Paid To (CIP)
Carriage and Insurance Paid To, or CIP, is an Incoterms rule where the seller pays carriage and insurance to a named destination.
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What Is Carriage and Insurance Paid To (CIP)?
Carriage and Insurance Paid To, or CIP, is an Incoterms rule used in international trade contracts. Under CIP, the seller pays for carriage to a named destination and must obtain cargo insurance for the buyer's risk during transport.
CIP can be used for any mode of transport. The named place matters because it identifies where the seller pays to send the goods, but risk may transfer earlier when the goods are handed to the carrier.
Key Takeaways
- CIP is an Incoterms rule for international sale of goods contracts.
- The seller pays carriage to the named destination.
- The seller must arrange insurance for the buyer's benefit.
- Risk and cost do not always transfer at the same point.
- Contracts should state the named place and Incoterms version clearly.
How CIP Works
In a CIP transaction, the seller arranges and pays for transportation to the named destination and obtains insurance coverage. The buyer receives the benefit of that insurance, but the buyer may bear risk after the goods are delivered to the first carrier, depending on the contract and rule details.
This split between cost and risk is one of the most important practical points. A seller can be paying freight to the destination while the buyer may already carry the transportation risk after delivery to the carrier.
CIP Responsibilities
Responsibility | Seller | Buyer |
|---|---|---|
Carriage to named destination | Arranges and pays | Receives benefit of arranged transport |
Cargo insurance | Arranges required insurance | Receives insurance benefit |
Export clearance | Usually responsible | Provides needed information if required |
Import clearance | Usually not responsible | Usually responsible |
Risk after carrier handoff | May transfer at carrier handoff | May bear risk before destination arrival |
Why It Matters
CIP affects price, logistics, insurance, claims, and documentation. Misunderstanding the rule can leave a buyer or seller surprised about who bears loss, who files insurance claims, and who pays local import costs.
It is especially important in contracts involving multiple carriers, international shipping lanes, customs documents, or high-value goods.
Limits and Misunderstandings
CIP does not mean the seller bears all risk until the goods arrive at the destination. The seller pays carriage and insurance, but risk transfer is a separate issue.
Incoterms rules also do not replace the full sales contract. They do not determine title transfer, payment terms, breach remedies, product quality, or all customs and tax obligations.
The Bottom Line
CIP means the seller pays carriage and arranges insurance to a named destination. The practical details depend on the named place, the Incoterms version, and how the contract handles risk, documents, and import obligations.