CIP terms in simple language

   The information provided here is part of Guide on howtoexport and import 


CIP terms of delivery – Easy definition

As per international commercial terms 2010, one of the large 7 terms is CIP.  CIP is used for any mode of transportation like Road, Rail, Inland water, Sea, Air or by any combination(s).

 

 

As per Inco terms, CIP means ‘Carriage and Insurance paid to (named place of destination). I will make you CIP term, easy to understand:

 
‘CIP terms of delivery in Exports and Imports’, explained easily.


CIP terms in simple language copyOnce after goods ready for export, the seller has to arrange proper packing of goods and transport goods to nearest customs location to complete export customs formalities at his on cost by producing necessary documents with the exporting country’s customs authorities.  After obtaining export customs permission to ship the goods to overseas destination, the seller delivers goods to the carrier to pick up the goods for on carriage to final destination.  The goods are loaded either in to truck, local vessel, aircraft, rail, main vessel or any other mode of transport by road, rail, inland water, air or sea at the seller’s cost under CIP terms.  It is the duty of seller to pay freight or other carriage charges up to the destination contracted under CIP terms.   Once after goods gone ‘on board’ the carrier, the obligation on risk of buyer fulfills. 

 

 

 

 

 

 

However, seller needs to pay minimum insurance to cover the risk of goods up to the destination mentioned in the contract.  For example, if an exporter ships goods from Shanghai to Mumbai under CIP terms of delivery, the seller’s (exporter’s) liability on risk ends once the goods gone onboard on the carrier at Shanghai.  However the seller needs to arrange minimum insurance on goods from Shanghai to Mumbai at his on cost.  Under CIP terms, the seller nominates carrier by himself.

 

 

The above simple explanation is easy to understand that under CIP terms of delivery, the seller completes all export customs clearance procedures and formalities at his own cost and risk.  All required documents and licensing formalities in exporting country are the responsibility of seller under CIP terms.  Under CIP terms, the proper checking, packing and marking of each packages for export is the responsibility of exporter.

 

 

Please note, I have mentioned about seller’s liability on insurance cover as ‘minimum insurance’.  This means, if the buyer wants to cover more risks against loss or damage to the goods, he needs to arrange additional insurance cover  other than contracted under CIP terms at his own (buyer’s) cost.

      

So under CIP terms of delivery, the risk of seller ends immediately up on delivery of goods to the carrier.  If two carriers are involved during on carriage to final destination, the seller fulfills his obligation on risks immediately up on delivering goods to the first carrier.   

 

 

Once after arrival of goods at the final destination mentioned in CIP terms, the rest of all liability to take goods at importer’s premises is with the buyer. Under CIP terms, the buyer’s responsibility is to meet all the requirements of importing procedures and formalities with licensing, documentation etc.  Any taxes, duties or other charges under import formalities need to be payable by the buyer. 

     

Detailed articles about Inco Terms of Delivery under export and import of International business  have been mentioned in  separate category – INCO TERMS – in this web site.  You can click here to read.


I hope I have made CIP terms simple to understand by easily explained.

 

 

Do you have additional thoughts on CIP terms?   Comment below:

 

The above information is a part of Online export import training guide 


CIP terms in simple language

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Comments


Vikas : Sir. Can you exlain what is covered in minimum insurance which seller has to insure. As the essence of CIP term is in the minimum insurance. In waits.. .

Praval Medhavi: Out of CIF & CIP incoterms, as a buyer which is more suitable in terms of safe and hassle free delivery of goods by air cargo.

Muraleeswaran R: Dear Sir, In case of CIF - New york. The exporter takes the insurance cover from his factory to final destination New York. In this case, who is responsible for an insurance claim. Who has to lodge the insurance claim is it the exporter or the buyer. Kindly clarify. Thanks & Regads. Muraleeswaran

Mithilesh Dubey: very usefull & clear information on this site for export & import.

Amin: What about the payment ? when will the buyer pay the seller for the goods? on loading or after receiving the products?

mwaq: Hello SIr, I have got a quotation from a company in germany and its says "Incoterms: FedEx, CIP/Insurance paid to Lahore, Punjab. Delivery is subject to approval by all governmental agencies" As of above statement it looks like seller is bearing insurance/cost etc upto Lahore. However it is not clear that; 1. The product will straight arrive to my home? 2. It will be blocked at import customs unless I pay for duties/taxes and produce otherdocuments. 3. Do I need Customs fees/duties/NOCs paid or produced before hand so that when it comes at import customs, it is automatically cleared and reached my home by carrier(FedEx in this case?)? Please, suggest what should I need to do to get my required products. Thanks?

Esti: When the liability is passed on to the buyer and the cargo is damaged who's responsibility is it to claim insurance. For example the goods are damaged on offload at Mumbai port and thus the risk is on the buyer. Should the buyer now claim the insurance the seller has taken out? Or should the seller claim?

Sandeep: Sir, if i am import some goods from Thailand, seller is quotation is at the price of USD 1/1qty CIF Chennai Port basis, FCL basis. in this case who will pay Indian custom tax, it is included in cost or i need clarify .

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