Insurance is a practice that has been in use for a long time in the world of trading and transportation, and transportation and insurance paid to (cip meaning) is the process where the seller pays insurance and freight to ship the goods to a party appointed by the seller at a location that is agreed upon. The danger of loss or damage to the items being transported is transferred over from the owner to the customer once the goods are handed over to the designated carrier or person.12 It is similar to, but distinct from cost freight, insurance, and cost (CIF) the agreement that is commonly used for maritime trade and commodity trading.3
In CIP, the seller is required to insure their goods while in transit at 110 percent of the value of the contract. 4 If the buyer requires more insurance coverage, they have to take care of the insurance independently. 1
CIP is one of the 11 Incoterms that are a collection of commercial terms that were most recently released at the end of 2020 by International Chamber of Commerce (ICC).
How CIP Functions
CIP is generally employed when it is used in conjunction with the destination. For example, CIP New York means that the seller will pay shipping and insurance costs towards New York. Similar to CPT, which is a form of carriage that is paid for (CPT), carriage or freight costs with CIP are transportation costs for any type of transportation, like rail, road air, inland waterway or multimodal transportation that combines them. cip meaning
As an example, suppose that LG is located in South Korea wants to ship tablets computers towards Best Buy in the United States. In the context of CIP, LG is responsible for all freight expenses and the minimal insurance coverage needed to transport tablets to the designated carrier or the person of Best Buy at an agreed-upon location. After the delivery of the shipment at the destination of the transporter or designated person by Best Buy, LG’s obligation is completed in addition, Best Buy assumes full risk and accountability for the shipment.
Additional Coverage under CIP
Since the seller is only required to buy only the minimum insurance for the transportation of the shipment to its location, the buyer needs to take into consideration arranging additional insurance coverage which protects the shipment from any risk. In other words, the buyer could be liable for huge costs if the shipment gets damaged or destroyed by an negative event that isn’t covered by the minimum insurance offered by the seller.
The buyer could also ask the seller for additional insurance coverage. Depending on the bargaining position of both parties, negotiate that the seller bear some or all of the costs of the additional insurance.
What is Carriage and Insurance Paid To (CIP) What is it that CIP covers?
CIP is a widely accepted Incoterm created by the International Chamber of Commerce (ICC) which regulates the shipping costs in a commercial sale. cip meaning It requires sellers to pay both the shipping and insurance charges when the delivery of goods to a buyer that is selected by the seller in a mutually agreed-upon place. Once the goods are delivered to the buyer, the chance of damage or loss is the buyer’s.cip meaning
How Much Insurance Will CIP Require?
The seller has to take out 110 percent of the value of the contract in insurance. If the buyer wants to obtain additional insurance, then arranging as well as paying is their responsibility.
What type of transportation is admissible to CIP?
Any recognized mode of transportation is possible, such as rail, road sea, inland waterways air, and any combination of these.
