Incoterms are much abbreviated! Nowadays, there are so many commercial terms used mostly in international business. But, how many of them are we well conversant with? One of the popular commercial terms is Carriage and Insurance Paid to. What does it mean or what is the essence of this incoterm? No problem. Today, I am explaining the basic idea on this key commercial term for your easy understanding.
CIP—Carriage and Insurance Paid to (…named place of destination. ‘Carriage and Insurance paid to… ‘ means that 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 other 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 of or damage to the goods during the carriage. (Incoterms 2017)
This term corresponds to CIF contract under sea transport. In addition to the obligations under ‘Carriage Paid to‘ contract, the seller should arrange for insurance for the goods and furnish the buyer with the insurance policy or other acceptable document. Therefore, the price quoted includes cost of the goods, freight charges and insurance premium. The cargo insurance should be on such terms that the buyer would be entitled to claim directly from the insurer.
Unless otherwise agreed it should be for 110% of the contract value with minimum cover of the Institute Cargo Clauses. When required by the buyer, the seller shall provide at the buyer’s expense war, strikes, riots and civil commotion risk insurance’s if procurable. In all other respects, the responsibilities of the seller and the buyer are same as under ‘carriage paid to’ contract.
Documents to be furnished under Carriage and Insurance Paid to are as follows:
(a) Freight paid waybill
(b) Insurance policy,
(c) Invoice and other documents as required by the buyer.