CIP – Carriage and Insurance paid to ... (Place of Destination)

Characteristics

Under CIP terms, the seller clears the goods for export and is responsible for deliver the goods at the agreed place of shipment. The seller must pay the cost of carriage, but seller’s risk ends at place of shipment. The seller must procure the minimum insurance until the named place of destination. The buyer has the option to contract additional insurance.

The risk is passed when the goods are received by the first carrier. This term can be used for any mode of transportation.



Incoterms 2010 CIP

Explained

Seller pays transportation and insurance to destination. Seller pays for minimum insurance which is often acceptable for bulk cargo, but not for manufactured goods or high value merchandise. The seller obtains insurance for buyer’s own risk. Delivery ocurre at origin with first carrier, this means that delivery happens at origin and seller pays for freight until final destination. Seller arranges export clearance and can be used for any mode of transportation.

In case of claims, buyer can claim directly with insurance company. For CIP and CPT, place at destination can be multiple locations. Freight doesn’t have the same cost when delivered at port or at a destination warehouse, additional inland and terminal handling charges will apply. Buyer is responsible for customs clearance. In practice, delays caused at origin which incurs in additional expenses are usually a point of discussion between buyer and seller.

Incoterms 2010 CIP - delivery

Examples

Mobile phones from Taiwan to Australia:

CIP Keilor Park warehouse of Mobile Distributors, Melbourne, Australia

In this scenario, mobile phones will be shipped by air from Taiwan to Melbourne Airport, after customs clearance, a destination forwarder nominated by seller will transport goods until Mobile Distributor’s warehouse. Destination terminal handling charges at airport and transfers fees at destination airpot are under the account of seller. Seller arranges insurance. Buyer pays for customs clearance and duties.

Seller and Buyer obligations

THE SELLER'S OBLIGATIONS
THE BUYER'S OBLIGATIONS
1. Provision of goods in conformity with the contract The seller must deliver the goods, provide commercial invoice or an equivalent electronic document, provide evidence of conformity or proof of delivery 1. Payment of the price The buyer must pay the price of goods as agreed in the contract of sale
2. Licences, authorisations and formalities The seller must provide export licenses or local authorizations for exporting goods 2. Licences, authorisations and formalities The buyer must get any export license and import permit for the export of goods
3. Contracts of carriage and insurance Contract of carriage at sellers expense in the usual route Contract of insurance. The seller must obtain at his own expense cargo insurance as agreed in the contract, such that the buyer, or any other person having an insurable interest in the goods, shall be entitled to claim directly from the insurer and provide the buyer with the insurance policy or other evidence of insurance cover. 3. Contracts of carriage and insurance Contract of carriage: no obligation Contract of insurance: no obligation
4. Delivery The seller must deliver the goods to the first carrier as agreed on named place and time 4. Taking delivery Take delivery of the goods at the agreed place
5. Transfer of risks The seller is responsible for the goods loss and damaged until the goods have been delivered as agreed 5. Transfer of risks Assume al risk of loss and damage at the time the goods have been delivered to the first carrier
6. Division of costs The seller pays all cost until goods have been delivered to the first carrier, including loading at place of origin and unloading at place of destination under the agreed contract All export cost, duties and taxes until the agreed point of destination, cost if insurance 6 Division of costs The buyer pays all cost until goods have been delivered at point of destination, cost and charges while cargo is in transit not included in the contract of carriage, duties and taxes at destination as well as import clearance
7. Notice to the buyer The seller must provide notice of the goods delivered 7. Notice to the seller The buyer must provide sufficient notice for the goods to be delivered as per agreement
8. Proof of delivery, transport document or equivalent electronic message The seller must provide the usual transport document or electronic message equivalent 8. Proof of delivery Transport document or equivalent electronic message, accept the transport document as per contract
9. Checking The seller must bear the cost of checking, quality control, measuring, weighing, counting, packing of goods and marking. If special package is required, the buyer must inform and the seller and agreed on extra expenses 9. Inspection of goods The buyer must bear the cost of pre-shipment and exports inspection except when is mandatory by the government
10. Other obligations The seller must cooperate with all documentation for export and insurance 10. Other obligations Reimburse the seller for cost related to obtain documentation that buyer requires for customs clearance at destination.