General

What does the international trade term CIP mean? The international trade term CIP refers to that the seller delivers the goods to the carrier designated by the seller, during which the seller must pay the freight for transporting the goods to the destination and cover the risk of loss or damage of the buyer's goods in transit. That is to say, the Buyer shall bear all risks and additional costs incurred by the Seller after delivery.

Differences between Incoterms CIP and CIF

There are similarities between CIP and CIF. Their price composition includes the usual freight and agreed insurance premium, and the contracts concluded according to these two terms are shipping contracts. However, CIP and CIF terms have obvious differences in terms of the place of delivery, risk division boundary, and the responsibilities and expenses borne by the Seller. The main differences are as follows: CIF is applicable to water transportation, the place of delivery is at the port of shipment, and the risk division is based on the ship's rail at the port of shipment (the risk division boundary in Incoterms 2010 has been changed to the ship at the port of shipment). The Seller is responsible for chartering and booking space, and paying the freight from the port of shipment to the port of destination, In addition, it shall purchase water transportation insurance and pay the insurance premium. The CIP term is applicable to various modes of transportation. The place of delivery shall be agreed by both parties according to different modes of transportation. The risk is transferred when the carrier controls the goods. The insurance handled by the seller includes not only water transportation insurance, but also various transportation insurance.

CIP is an international trade term developed on the basis of CIF, which is applicable to various modes of transportation. In principle, the two parties have the same division of obligations. In terms of use, CIF term is only applicable to sea transportation and inland waterway transportation, and the risk is divided by the fact that the goods cross the ship's rail, while CIP term is applicable to any mode of transportation, and the risk is divided by the fact that the goods are delivered to the carrier. Therefore, the scope of application of CIP terms is far greater than CIF.

Precautions for CIP

1. Risk and insurance issues: For contracts concluded according to CIP terms, the Seller shall be responsible for handling freight insurance and paying the insurance premium, but the Buyer shall bear the risks during the transportation of the goods from the place of delivery to the destination. Therefore, the insurance of the Seller belongs to the nature of agency. According to the interpretation of the General Rules, in general, the Seller shall purchase insurance according to the risks determined by both parties through negotiation. If both parties do not specify the risks to be purchased in the contract, the Seller shall purchase the lowest risk according to management. The insurance amount is generally 10% of the contract price, 110% of the CIF contract price and the contract currency.

2. The price shall be reasonably determined: compared with FCA, the Seller shall bear more responsibilities and costs under CIP conditions. Be responsible for handling the transportation from the place of delivery to the destination, and bear the relevant freight. Handle freight insurance and pay the insurance premium. These are reflected in the price of goods. Therefore, the Seller shall carefully calculate the cost and price when quoting. In accounting, it is necessary to consider the transportation distance, insurance types, various modes of transportation and the charges of each joint insurance, and to predict the change trend of freight rates and insurance premiums.

The above is an introduction to the international trade term CIP. I hope it will be helpful to you.