A comparative study between CIP terms and FOB terms

FOB and CIP under Inco terms 2020

Free On Board Vs. Carriage and Insurance Paid

Under Free On Board (named place), the seller is responsible to move the goods on board the vessel nominated by the buyer.    Under, CIP delivery rules seller pays the cost of carriage to the named place and discharges his risks after loading goods to the Carrier. 

Seller is responsible to undertake minimum insurance cover against movement of goods under CIP terms of delivery whereas under FOB delivery rule, both seller and buyer is not responsible to undertake insurance according to Incoterms 2020 rules.  Insurance under FOB may be contracted separately out of Incoterms 2020 rules.

CIP delivery terms can be used for all modes of transport; by Sea, by Air or by Land.  However, FOB is defined by ICC under Incoterms 2020 rules to use only for the movement of goods by Sea and Inland waterways, as FAS is known as one of the Marine restricted modes of transport.

The cost of Main carriage under CIP is undertaken by the Seller, where as the costs and risk of Main Carriage is under the responsibility of buyer under FOB delivery rules.

Under CIP terms, the contract of carriage ends when goods reached destination named place at buyer’s side where as under FOB, the contract of carriage ends when goods are loaded to the ship (On board to the Vessel)  at Seller’s  country.

Under FOB rules, the seller transfers risks and cost of movement of goods to buyer when goods are under onboard the vessel, where in CIP terms, the risks under movement of goods transfers  from seller to buyer after loading of cargo to Carrier, but cost of movement of goods to the named place at buyer’s country.

Two detailed posts about CIP and FOB are written separately in this website for easy understanding.  You may click below to read:

FOB  Free On Board

CIP  Carriage and Insurance Paid To

The details above elaborated the difference between FOB and CIP.  Share below your suggestions about CIP vs FOB below:

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