Legal Definitions - carriage and insurance paid to

Carriage and Insurance Paid To (CIP) is an international trade term, often referred to as an Incoterm, that defines the responsibilities of the seller and buyer for the shipment of goods. It specifies who is accountable for the costs, delivery, and risk of loss or damage during the shipping process.

Under CIP terms, the seller has several key responsibilities:

• They must clear the goods for export from their country.
• They are responsible for arranging and paying for the transportation of the goods to a named destination agreed upon with the buyer (e.g., a specific port, airport, or city).
• Crucially, the seller must also procure and pay for insurance coverage against the buyer's risk of loss or damage to the goods during transit.

However, an important distinction in CIP is when the risk of loss transfers. While the seller pays for carriage and insurance all the way to the destination, the risk of the goods being lost or damaged actually transfers from the seller to the buyer much earlier – specifically, when the seller hands the goods over to the first carrier (e.g., a trucking company, airline, or shipping line) at the point of origin. This means that if something happens to the goods during the main journey, the buyer bears the risk, but the insurance policy paid for by the seller would cover it.

CIP can be used for any mode of transportation, including air, sea, road, or rail.

Examples:

• Example 1: Electronics Shipment

  A laptop manufacturer, "TechGadgets Inc." in Taiwan, sells 1,000 laptops to a distributor, "EuroTech Solutions", in Germany under CIP Frankfurt Airport, Germany terms. TechGadgets Inc. is responsible for packaging the laptops, clearing them for export, arranging for a truck to take them to Taipei International Airport, and then paying for the air freight and insurance coverage for the entire journey to Frankfurt. The moment TechGadgets Inc. hands the laptops over to the airline in Taipei, the risk of any damage or loss during the flight transfers to EuroTech Solutions. If the laptops are damaged during the flight, EuroTech Solutions would make a claim against the insurance policy that TechGadgets Inc. purchased.

• Example 2: Industrial Machinery

  An Italian company, "Robotics Innovations S.p.A.", sells a specialized robotic arm to a factory, "Automated Systems Ltd.", in Mexico, with the terms CIP Mexico City, Mexico. Robotics Innovations S.p.A. handles all export documentation, disassembles and crates the machinery, arranges for its transport by truck to a port in Genoa, and then pays for the ocean freight and insurance to Mexico City. The risk of the robotic arm being damaged shifts to Automated Systems Ltd. as soon as it is loaded onto the initial truck in Italy. Should the machinery be damaged during the sea voyage, Automated Systems Ltd. would be responsible for filing a claim with the insurer that Robotics Innovations S.p.A. arranged.

• Example 3: Pharmaceutical Supplies

  A U.S. pharmaceutical company, "Global Meds Corp.", ships a large order of temperature-sensitive vaccines to a hospital network, "HealthFirst Canada", under CIP Montreal, Canada terms. Global Meds Corp. ensures the vaccines are packed in specialized temperature-controlled containers, completes all U.S. export customs, and arranges for air cargo transport from New York to Montreal, paying for both the freight and the necessary insurance. The risk of the vaccines spoiling due to temperature fluctuations or being lost passes to HealthFirst Canada the moment Global Meds Corp. delivers them to the airline in New York. If the vaccines are compromised during transit, HealthFirst Canada would be the party to initiate an insurance claim using the policy Global Meds Corp. provided.