Incoterms CIP

What are INCOTERMS 2020 ?

INCOTERMS rules are an international set of trade rules that apply worldwide. They are used in international transactions and Incoterms define the responsibilities, costs and risks between buyer and seller. The author of Incoterms is the International Chamber of Commerce (ICC), which created the rules to facilitate smooth and efficient international trade.

What is CIP Incoterms?

Incoterms CIP stands for Incoterms. Carriage and Insurance Paid to which, translated into Polish, means Carriage and insurance paid for by.  It means that the seller is responsible for delivering the goods to the place of destination, which may be a port, a rail terminal, an airport or any other point in the city that we designate. It is worth noting that in this INCOTERMS formula, the responsibility for damage or loss of the goods is transferred to the buyer from the moment the seller delivers the cargo to the carrier who will perform the transport, for example, the shipowner, operator rail or airline. The CIP formula applies to any mode of transport: in maritime transport, rail, air and road. 

Place of delivery and destination 

Two points are important in INCOTERMS CIP, namely the place of delivery where the goods will be picked up by the sea carrier, road carrier, aviation or rail and the second point is the destination where the goods are to end up. It is important that these two points are precisely defined in the sales contract, the point of destination can be a port as well as another place within a given city, therefore it is important to specify this precisely. 

Insurance for CIP

Under the CIP formula, the seller is responsible for arranging the insurance, the insurance must be taken out at least up to the point of destination of the goods. Insurance under the INCOTERMS CIP formula should include a broader insurance package in accordance with Cargo Clause (A). 

It is worth recalling, however, that although the seller is obliged to take out insurance, the buyer bears the risk for damage or loss of the goods for most of the route. However, in the event that the goods are insured, it will be possible to claim compensation. 

Vendor responsibilities:

• The seller must provide the goods as well as the commercial invoice and other necessary documents.

• The seller is obliged to deliver the goods to their destination and to conclude a contract of carriage with the carrier. 
• The seller bears the risk of damage to the goods until they are delivered to the carrier, after which the responsibility shifts to the buyer.
• The seller is responsible for the transport costs from the place of delivery (where the carrier picks up the goods) to the place of destination, a transport contract must be concluded.  
• The seller must insure at least up to the port of destination and provide the buyer with proof of insurance, e.g. a policy or certificate. Also, if the buyer wishes to take out additional insurance on the cargo, the seller must make available all the necessary data, for example the name of the ship on which the cargo is sailing, etc.
• The seller must also provide the buyer with a shipping document, where all the purchased goods are included and whereby the buyer can collect the goods from the port.
• The seller is responsible for carrying out export clearance and completing all formalities such as export licence, export security clearance, pre-shipment inspection and any other formalities relating to goods passing through third countries.
• The seller also needs to provide the buyer with all the necessary information for import clearance in the destination country.
• The costs of quality control, measurements, weighing are also borne by the seller
• The seller must inform the buyer when the cargo arrives at the loading port

Responsibilities of the buyer:

• The buyer is obliged to pay the costs included in the sales contract
• The buyer is obliged to take over the goods from the carrier on the spot if everything has been carried out in accordance with the conditions
• The buyer bears the risk of cargo damage from the moment the seller delivers the cargo and hands it over to the carrier. 
• The buyer must carry out import clearance and pay customs duties

See also other INCOTERMS formulas:

INCOTERMS CIF

FOB INCOTERMS

INCOTERMS EXW

FCA INCOTERMS

INCOTERMS DAP

INCOTERMS DDP