CIP (Carriage and Insurance Paid to) is an international trade term under Incoterms® 2020 that requires the seller not only to pay for the carriage of the goods to the named place of destination but also to procure cargo insurance against the buyer’s risk of loss or damage to the goods during transportation. Aside from the insurance obligation, the division of risk, cost, and responsibilities between the seller and buyer under CIP is identical to CPT (Carriage Paid To).

Under CIP, the seller fulfills their obligation when the goods are handed over to the first carrier at an agreed time and place. This term applies to any mode of transport, including multimodal transport.

CIP vs. CIF – Key Differences

Both CIP and CIF (Cost, Insurance and Freight) require the seller to arrange and pay for transportation and insurance. However, the point of risk transfer is different:

CIP: Risk transfers from the seller to the buyer when the goods are handed over to the first carrier.

CIF: Risk transfers when goods pass the ship’s rail at the port of shipment.

Furthermore, CIP can be used for any mode of transport, while CIF is only applicable to sea and inland waterway transport. In terms of insurance, CIP requires a higher level of coverage (Clause A), while CIF only requires minimal insurance (Clause C).

Delivery and Risk Transfer

• Delivery under CIP means the seller physically hands over the goods to the first carrier. The moment the goods are delivered to the carrier, risk transfers to the buyer—even if the seller has contracted and paid for transportation to a distant destination.
• Example: If a seller agrees to deliver CIP to a non-port location such as Winchester or Las Vegas, the seller must still contract transportation to the named destination. However, risk transfers once goods are handed to the first carrier.
• Specified Place of Delivery: The more precisely the place of delivery and destination are defined in the contract (e.g., “CIP New York CY/CFS”), the better clarity for both parties.

Seller’s and Buyer’s Obligations

Seller must:

• Deliver goods on time and according to the contract.
• Pay for loading, pre-carriage, main carriage, insurance, export duties, and other related charges.
• Provide necessary documents like commercial invoices and proof of insurance.

Buyer must:

• Bear all risk once goods are handed to the carrier.
• Handle import formalities and unloading at the destination unless otherwise agreed.
• Accept delivery and collect goods from the named place.

Risk Transfer Principles

According to both Incoterms and the United Nations Convention on Contracts for the International Sale of Goods (CISG), the risk of loss or damage to goods transfers upon delivery, not when ownership changes or the contract is signed.

If goods are damaged due to improper packaging, labeling issues, or inherent defects, the seller remains responsible even after delivery because such damage would constitute a breach of contract.

Insurance Interest and Responsibility

The insured party must have an insurable interest, meaning they would suffer economic loss if the goods were damaged. CIP requires the seller to arrange insurance at minimum Clause A coverage, ensuring more comprehensive protection for the buyer.

Cost Allocation Under CIP

Cost Category	Responsibility
Loading at seller’s premises	Seller
Pre-shipment transport	Seller
Main carriage to destination	Seller
Export clearance	Seller
Import clearance & duties	Buyer
Insurance (Clause A)	Seller
Delivery at destination	Buyer (unless otherwise agreed)

Special Considerations

• Specify delivery locations clearly to avoid disputes.
• Avoid promising arrival deadlines at the destination, as CIP is a shipment contract and does not guarantee arrival time.
• Risk from intentional acts or non-accidental causes (e.g., poor packaging, non-compliance) does not shift to the buyer; the seller remains liable.