Drawbacks to sellers under CIP delivery rules
CIP, Disadvantages to Seller (Exporter)
This post is a part of detailed analysis on pros and cons of each delivery rules under Incoterms 2020 which affects exporters and importers under international business.
Here we discuss from the exporter’s side where he faces challenges under CIP delivery terms. The following are the disadvantages under CIP terms to sellers:
01.Since the importer undertakes on carriage from destination named port to his final destination under CIP terms of delivery, the exporter does not have control over tracking data of shipment till arriving goods at final destination.
02. Although the risk of main carriage ends when cargo loaded on board the vessel, under CIP delivery rules, the Seller has to pay ocean freight till the named destination contracted. The exporter should have sound knowledge and experience about the ocean carriers and their service to serve the importer for good business relationship.
03. If any port congestion, vessel shortage or vessel cancellation occurs at loading port, under CIP terms of delivery in export import business, the exporter is responsible to bear such costs and risks. Difficulty in meeting delivery time with buyer may also be faced.
04. Under CIP delivery terms, the seller has no control over on carriage till final destination of importer under CIP terms of delivery under international trade.
05. Although the exporter has to arrange minimum insurance against movement of goods under CIP, the importer may insist him to arrange all risk cover insurance, as the buyer is responsible for total risks of goods from goods loaded in to main carrier to buyer’s destination named place. A separate agreement may be required between buyer and seller under their sales contract subjected to the same.
06. Under CIP rules in export import biz, the exporter should have sound knowledge and experience in handling export regulations, export documentation, export taxes if any against his product failing which the exporter is liable to pay additional expenses than anticipated.
07. The exporter does not have any control over safety of goods, once the cargo is loaded in to Vessel or Aircraft, under CIP terms. So, the seller cannot assure the safety of goods sold, from that point to final destination including unloading of cargo at importer’s premises as the importer is responsible for all such movement of goods.
08. Compared to other inco terms except DDP, under CIP terms, the exporter does not want to learn import clearance, import government regulations in buyer’s country. This reason may lack exporter to enter into a sale contract where the buyer specifically ask for DDP terms of delivery. So in our point of view, every exporter and importer should learn and experience government rules and regulations of both exporting and importing country for strengthening their business.
Hope the above information about the drawbacks under CIP delivery terms to exporters helps you to add on your knowledge about Inco terms 2020.
Share below your views and add your comments below on this topic about demerits of CIP to a seller.