Incolearn – Learning more about Incoterms 2000

CARRIAGE AND INSURANCE PAID TO (CIP) PART I
– Introducing Carriage and Insurance Paid To The International Chamber of Commerce (ICC) defines the eighth Incoterm, Carriage and Insurance Paid to (CIP), at a named place of destination, as “the seller delivers the goods to the carrier nominated by him, but the seller must in addition pay the cost of carriage necessary to bring the goods to the named destination. This means that the buyer bears all risks and any additional costs occurring after the goods have been so delivered. However, in CIP the seller also has to procure insurance against the buyer’s risk of loss or damage to the goods during the carriage”. Carriage and Insurance Paid To is the last of four C-terms also known as the main carriage paid terms, the other being Cost and Freight (CFR), Cost, Insurance and Freight (CIF), and Carriage Paid To (CPT). This term can be used irrespective of the mode of transport, including multimodal transport. According to Professor Jan Ramsberg, the chairman of the ICC Working Party on Trade Terms, the seller’s primary duty is to contract for carriage and insurance, to deliver the goods to the first carrier, to provide a clean transport document, to arrange for export clearance, to pay the loading costs, and to pay unloading costs if for his account as stipulated in the contract of carriage. The buyer’s primary duty is to accept delivery of the goods when they have been delivered to the carrier, to receive the goods from the carrier, and to pay those costs that are not for the seller’s account as stipulated in the contract of carriage. The documents required in terms of the contract of sale should be the commercial invoice, the transport document, the export licence, if necessary, and the insurance policy or certificate. The other documents needed could be for the transit of the goods through any country or for import clearance. The three critical points of CIP are firstly, that the seller must arrange the carriage and insurance. Secondly, that the risk transfers from the seller to the buyer when the goods have been delivered to the first carrier, and thirdly, where the cost transfers at the place of destination, the buyer pays those costs that are not for the seller’s account under the contract of carriage. Next week’s column will focus on the seller’s obligations under Carriage and Insurance Paid To (CIP).