What Is CIP? Meaning, Carriage, Insurance (Clause A, 110%), Risk Transfer, and CIP vs CIF

Under CIP the seller pays carriage and insurance to destination, yet the risk of cargo damage has already passed to the buyer at origin. Miss this mismatch and it is easy to assume "the seller even bought insurance, so we are covered."

This piece looks closely at CIP alone. For a comparison of all 11 rules, see the complete Incoterms 2020 guide.

What Is CIP?

CIP (Carriage and Insurance Paid To) is the Incoterms rule under which the seller pays carriage and insurance to the named destination. It works for any mode of transport (sea, air, road, or multimodal) and belongs to Group C, where the seller pays the main carriage. In the contract you write the rule and destination together, like "CIP Incheon."

CIP is CPT (Carriage Paid To) with an added insurance obligation. Everything is the same as CPT, except that the seller also arranges insurance.

Who Bears What Under CIP

Insurance must be at the top-tier ICC (Institute Cargo Clause) A, covering 110% of the value. Incoterms 2020 raised CIP insurance to this level.

Cost Runs to Destination, Risk Transfers at Origin

This is the most important point about CIP. The cost divide and the risk divide are different.

• Cost: the seller pays carriage and insurance to destination
• Risk: transfers to the buyer at origin, once the goods are handed to the first carrier

So if there is an incident in transit, the risk of damage already sits with the buyer even though the seller arranged the carriage and insurance. Because the seller's policy protects the buyer, the buyer must confirm the insurance policy and the claims procedure.

CIP vs CIF: The Most Confusing Difference

Both put freight and insurance on the seller, but they differ in decisive ways.

For containerized, air, or multimodal cargo, CIP is the right rule, not CIF. CIF assumes conventional sea cargo such as bulk. For a side-by-side comparison of insurance and risk transfer, see CIF vs CIP.

CIP vs CPT: Only Insurance Differs

Under CPT the seller pays carriage only and has no insurance obligation. CIP adds ICC Clause A insurance on top. Use CIP when you want the seller to handle insurance too; use CPT when the buyer will insure the cargo directly.

When to Use CIP

• When you want the seller to also cover insurance for containers (FCL/LCL), air, or multimodal transport: CIP is precise here, rather than sea-only CIF.
• When the buyer lacks the capacity to arrange transport and insurance: the seller handles carriage and insurance to destination, if not quite to the door.

Import Duty and CIP

Korea assesses the customs value on a CIF basis (freight and insurance included). Since CIP already includes carriage and insurance in the price, the CIP amount becomes the customs value directly. To see the duty and VAT on a CIP amount right away, use the CIP import duty calculator.

This guide is for general information. Actual contracts depend on the detailed rules and each deal, so confirm against the ICC rules and with a specialist.