5 Essential Notes about: CIP Incoterms
Carriage and Insurance Paid To (CIP Incoterms) means that the seller delivers the goods to the carrier at an agreed place (if any such place is agreed between the parties). The seller must contract and pay the costs of carriage to bring the goods to the named place of destination. The seller contracts for insurance cover against the buyer’s risk of loss or damage to the goods during the carriage.
It is highly recommended to read the post about CPT Incoterms on Shipup Blog in addition to current post.
1. Who is responsible for Contacting the carriage and Insurance in CIP Incoterms?
– The seller must contract for the carriage to the named place at destination. He also is obliged to contract for the insurance cover against the buyer risk of loss or damage during the carriage. The seller is required to obtain insurance only on minimum cover under CIP Incoterms.
2. What is the main difference between CPT and CIP Incoterms and which one is preferable?
– The only difference is that under CIP the seller must obtain and pay for cargo insurance. This is particularly important for the buyer, since under CIP the risk of loss of or damage to the goods will pass from the seller to the buyer when the goods have been delivered to the carrier at the place of delivery.
3. How about the duration of insurance Under CIP Incoterms?
– The insurance must cover the buyer risks and protect him from the moment the goods have been delivered to the carrier at the place of delivery. It must extend until the goods arrive at the agreed place of destination or an agreed point within that place.
4. Which type of insurance is mandatory in CIP Incoterms?
– The seller is obliged to obtain cargo insurance at its own expenses at least with the minimum cover as provided by Clauses (C) of the Institute Cargo Clauses (LMA/IUA) or any similar clauses. Some particular risks require additional insurance. If the buyer requests it, the seller must arrange this additional cover at the buyer’s expense. For example, insurance against the risks of war, strikes, riots and civil commotion – if this cover can possibly be arranged.
5. How much is the amount of insurance in CIP Incoterms?
– The amount of the insurance should correspond to the price provided in the contract, plus 10 per cent. The additional 10 per cent is intended to cover the average profit which buyers of goods expect from the sale. The insurance should be provided in the same currency as stipulated in the contract for the price of the goods. Consequently, if the price of the goods is to be paid in convertible currency, the seller may not provide insurance in other than convertible currency
To read the full obligation of the seller and the buyer in CIP Incoterms read the book “ICC Guide to Incoterms 2010”
Other useful links:
5 Essential Notes about: Free On Board (FOB) Incoterms
5 Essential Notes about: Free Carrier (FCA) Incoterms
5 Essential Notes about: Ex Works (EXW) Incoterms
Incoterms: Shipping Guide Every Trader Must Know