07 flies in the ointment when an Importer contracting CIP terms

CIP, disadvantages to Buyer

This is a post among many others about a deep discussion about Inco terms 2020 analyzing deeply under each delivery rule and its impact to exporters and importers when applying.

This post is about the challenges faced by buyers when they contract CIP delivery terms.  Let us discuss one by one below:

01.In international trade, one of the main disadvantages under CIP for importer is that the cost of movement of goods is taken care till the named place by the exporter, but the risks of movement of goods are on importer’s shoulder immediately up on the cargo loaded in to the main carrier. 

02. The main carriage is controlled by the exporter under CIP terms in export import business by handling main carriage freight.  Appointing a poor shipping carrier or a poor freight forwarder to save main carriage freight by the seller may affect the movement of goods in rendering good service to importer in delivering the goods. 

03. In a CIP terms of delivery under export import business, the exporter is liable to arrange insurance on movement of goods till the named destination contracted.  However, the exporter may arrange minimum insurance cover which may lead to problems and disputes between exporter and importer.  So under CIP terms, the importer should satisfy the clauses covered by exporter on movement of goods or else, the importer has to contract separately with exporter about all risks cover under their sale contract.

04. In export import trade, the importer under CIP terms of delivery should be well conversant with import customs clearance process, import documentation, import licensing procedures, import taxes if any etc. failing which he is liable to meet additional expenses than anticipated resulting loss in the said business transaction.

05. The importer under CIP terms also is liable to undertake on carriage process from the destination named port to his final destination.  Lacking sound knowledge and inexperience in handling local transportation result additional costs than calculated.

06. Since the exporter handles main carriage under CIP delivery rules, the importer has to request the exporter for getting export data, EGM details.  (Flight details / Vessel details)

07. Although the cost is paid to the named location by seller, the unloading liability is with the buyer under CIP delivery rules.  So the costs and risks involved under unloading goods at buyer’s place is under the liability of buyer.

Have you satisfied with the above information about the drawbacks for importers under CIP terms?

Share below your experience and views in handling CIP terms and its disadvantages from buyer’s corner.

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