Carriage And Insurance Paid To (CIP)

There are many ways to ship a product, and also many things that can go wrong before the final destination is reached. So a whole vocabulary exists to describe various shipping scenarios. This internationally followed group of terms is called Incoterms. Ever heard the thing where Eskimos have dozens of different words for snow? Kinda like that, there are 11 different ways to ship products that define who takes ownership at any point along the way. Carriage and Insurance Paid To (CIP) is one of them.

There are generally three parties involved in moving goods from one point to another: the buyer, the seller and one or more carriers. Sometimes the seller pays for the freight and assumes liability, and sometimes the buyer does. It's important for them to define at what point they take ownership of the goods...at the shipping dock, when the goods are on the truck, when the truck arrives at the destination or when they are unloaded and in the buyer's warehouse.

With Carriage and Insurance Paid To the seller has agreed to pay for the cost of shipping and also for the cost of insurance up to a particular point. Under CIP, the seller must insure the goods for 110% of their value. If the buyer wants additional insurance coverage they would have to pay for it or negotiate to have the seller pay for it. As soon as the seller delivers the goods to the first carrier (truck, plane, train, etc.), ownership and all risks transfer to the buyer.

So let's say Sam's Soybeans, Inc. of Kansas City, Missouri sold 500 bushels of soybeans to Suki's Restaurant in Tokyo. The terms of sale are CIP Port of Los Angeles to be loaded on the container ship SeaLand. Sam will ship the soybeans via truck and pay the cost of freight and insurance from Kansas City until the soybeans are loaded on the ship.

Unfortunately, the ship hits a big storm at sea and the container of soybeans falls off. The buyer Suki has to file the claim against SeaLand because she was responsible for paying for freight and insurance starting in Los Angeles.