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Incoterms: Carriage and Insurance Paid To

Posted in General Information - 6 Aug 2018, 2:02 PM

At first glance, you might mix this one up with Carriage Paid To or CPT. Obviously, carriage and insurance paid to or CIP is slightly different. Starting from its definition, CIP is another commercial term in trading business. It indicates that the seller is in charge of delivering the goods to the destination that is specified.

The seller’s responsibilities in carriage and insurance paid to or CIP:

Just like with Cost Insurance and Freight or CIF and also Carriage Paid To or CPT, carriage and insurance paid to or CIP also makes the seller pay for the freight and insurance. The risk for any damages or loss regarding the transported goods is transferred from the seller to the buyer. This happens once the process of delivering the goods to the carrier has been done.

The seller also has another responsibility in carriage and insurance paid to or CIP, which is: insuring the shipment of goods. However, this obligation sticks according to the minimum level of the insurance covered. If the buyer needs more than what is already there, then the additional cost of insurance goes to the buyer. The buyer needs to arrange it themselves.

The difference between carriage paid to (CPT) and carriage and insurance paid to (CIP):

What makes a distinctive difference between carriage and insurance paid to or CIP with Carriage Paid To or CPT is the word ‘insurance’ itself. That is right, the seller is in charge of  the insurance payment. The insurance is for the goods while they are still in transit. To be exact, the CIP’s requirement for the seller to insure them is by 110% of the value of the contract. It should be under at least the minimum cover, based on the standard from The Institute Cargo Clauses of The Institute of London Underwriters.

The policy which is standardised by The Institute Cargo Clauses should have the same currency as the contract previously mentioned above. That same contract should also allow the buyer, the seller, and all parties with insurable interest regarding the goods to have the same rights to file a claim.

Unlike Cost Insurance and Freight or CIF, carriage and insurance paid to or CIP can be used for all transportation modes, whether by sea, road, rail, or even inland waters like the rivers. In some cases where the route is long, there might a combination of two different transportation modes before the goods finally arrive at the specified destination. (For example: from delivering the goods by truck to the boat before the goods arrive at the specified port.) CIF term cannot be used if the goods transported are non-containerised. This is why you can choose carriage and insurance paid to or CIP if you have non-containerised goods to be delivered.

There is another thing that you need to remember, though. Just like with Carriage Paid To or CPT, carriage and insurance paid to or CIP also has to go through Terminal Handling Charges or THC. Then again, it depends on the seller. Carriage and Insurance Paid To or CIP will definitely be suitable for you who need to have insurance on the goods to be transported. It is best to have good communication between the seller and the buyer to avoid misunderstandings.

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