Carriage and Insurance Paid – Definition

Cite this article as:"Carriage and Insurance Paid – Definition," in The Business Professor, updated January 24, 2020, last accessed August 12, 2020, https://thebusinessprofessor.com/lesson/carriage-and-insurance-paid-definition/.

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Carriage and Insurance Paid (CIP) Definition

CIP refers to an Incoterm which symbolizes a setting where a seller delivers goods situated in his country to be transported to a buyer in a different country. According to a Carriage and Insurance Paid agreement, a seller must buy insurance for the risk which the buyer bears for losing or damaging the goods during foreign transport. In the CIP, the seller must carry out the requirements and bear the export customs clearance costs. But the seller does not bear the import clearance which should be borne by the buyer.

A Little More on What is Carriage and Insurance Paid

The Seller’s Obligations:

Deliver the product, as well as, the commercial invoice or the similar electronic message by the sale contract and any other conformity proof which a said contract might require.

Get, at its expense and risk, any official authorization or whichever export license and execute, when necessary, the customs requirements for goods exportation.

The contract, based on the normal conditions and also at their expense, transporting the product to the rendezvous, by the normal route and also in a consensual manner.

Receive, at its expense, cargo insurance based on the agreement in the contract that empowers the buyer or someone else with an insurable interest in the product, to request directly from the insurer and then deliver to the buyer with the insurance policy or any other insurance coverage proof.

Deliver the product to the carrier who was contracted or, supposing successive porters are available, to the initial carrier, for transportation on the exact date and time, and also at the rendezvous.

Bearing every risk of damage or loss of the product up to the point where it’s been handed over to either the contracted carrier or, supposing successive porters are involved, to the initial carrier.

Pay every expense associated with the product until it’s delivered based on the contract’s terms and conditions.

Give the buyer enough notice of the goods’ delivery as agreed.

Pay the verification operation expenses (measurements, weight, and quality) needed for delivering the goods based on the agreement.

Give, at their cost, the packaging needed for transporting the goods (supposing it’s normal in the traffic to package the specific goods).

Provide, upon request, the buyer’s expense and risk, the exact help needed in obtaining a document or an equivalent electronic message transmitted or issued in the country of origin and or delivery, which the buyer might need for importing the product, and if important, for its movement via any country.

Give the buyer, upon request, necessary details for obtaining supplementary insurance.

The Buyer’s Obligations

Pay the goods’ value, as stated in the contract.

Pick up, at its expense and risk, an import license or any official permission and carry out, when necessary, the customs processes for importing the goods, as well as, their transit via any country.

Collect the delivered merchandise once it’s been delivered in line with the contract agreement.

Bear every risk of losing or damaging the merchandise once it’s been delivered to the carrier contracted or, supposing successive porters are available, to the initial carrier, as agreed.

Pay every expense associated with the product upon its delivery in line with the contract.

When certified to ascertain the issuance time of the good and/or its destination, provide the seller with adequate notice.

Make payment for any pre-shipment inspection expenses, unless the export country’s authorities ordered it.

References for Carriage and Insurance Paid (CIP)

http://www.businessdictionary.com/definition/carriage-insurance-paid-to-CIP.html

https://www.investopedia.com/terms/c/carriage-and-insurance-paid-cip.asp

Academic Research on Carriage and Insurance Paid (CIP)

Incoterms 2010: The newest revision of delivery terms, Bergami, R. (2012). Incoterms 2010: The newest revision of delivery terms. Acta Universitatis Bohemiae Meridionales, 15(2), 33-40. This paper considers the changes between the Incoterms 2000 and the Incoterms 2010 from a risk management perspective, and highlights the challenges that traders may encounter when dealing with some of these terms. For example, the problematic FOB term and its use in containerisation is not likely to have been totally resolved, although the Incoterms 2010 have attempted to ameliorate the situation. The new terms DAT (Delivered at Terminal) and DAP (Delivered at Place) should be useful for cross border transactions within Customs Union blocs, such as the European Union. The paper concludes that the new Incoterms 2010 provide improved definitions, and more effectively contextualise the use of old terms that are out of synch with today’s modern practices. However, if traders continue to cling to their old habits and fail to update their delivery terms and arrangements to reflect contemporary practices, much of the work and progress that the ICC has put into this change process will be lost.

The link between Incoterms 2000 and Letter of Credit Documentation requirement and payment risk, Bergami, R. (2006). The link between Incoterms 2000 and Letter of Credit Documentation requirement and payment risk. Journal of Business Systems, Governance and Ethics, 1(4), 49-58.

Incoterms 2010 and the mode of transport: how to choose the right term, Malfliet, J. (2011). Incoterms 2010 and the mode of transport: how to choose the right term. In Management Challenges in the 21st Century: Transport and Logistics: Opportunity for Slovakia in the Era of Knowledge Economy (pp. 163-179). City University of Seattle Bratislava. Incoterms 2010 provide harmonized interpretation rules for eleven common trade terms. From these eleven common terms, a trader has to choose the Incoterm that is most appropriate for the specific transaction he wishes to engage in. The International Chamber of Commerce (ICC) encourages the use of ‘multimodal’ terms (FCA, CPT, CIP, etc.) instead of the ‘maritime’ Incoterms (FAS, FOB, CFR and CIF). According to the ICC, maritime terms are not appropriate, and thus should not be used in container trade, as the seller does not ‘deliver’ the container on board the vessel, but most often hands over the goods to the carrier at an inland point or terminal. This paper intends to examine the underlying rationale behind this advice. Furthermore, this paper intends to provide support for traders, proposing criteria that might be applied to choose the right Incoterm. It will thereby take into consideration how the transport mode influences and sometimes even imposes the choice for a particular term.

Incoterms and UCC Article 2—Conflicts and Confusions, Spanogle, J. A. (1997). Incoterms and UCC Article 2—Conflicts and Confusions. The International Lawyer, 111-132.

The possible influence of the shipper on carbon emissions from deep-sea container supply chains: An empirical analysis, McKinnon, A. (2014). The possible influence of the shipper on carbon emissions from deep-sea container supply chains: An empirical analysis. Maritime Economics & Logistics, 16(1), 1-19. This article examines the extent to which shippers can influence the level of carbon emissions from the deep-sea container supply chain. It uses data collected in an online questionnaire survey of 34 large UK shippers, supplemented by the results of focus group discussions and interviews with a range of key stakeholders, including shipping lines, freight forwarders, logistics companies and port operators. The online sample comprised shippers responsible for inbound and/or outbound deep-sea containers flows. The amount of leverage that they can exert on ‘carbon-sensitive’ decisions depends partly on the Incoterms that they employ and their use of freight forwarders. Many large shippers still retain significant influence over the choice of carriers used for deep-sea and port feeder services, consignment routing and scheduling and the choice of port. Shippers responsible for inbound flows reported high levels of container fill, though opportunities exist for improving the weight utilisation of outbound containers, possibly by moving to a port-centric logistics model. Around 40 per cent of the shippers consulted currently measure CO2 emissions from their deep-sea container supply chains with only 6 per cent explicitly implementing carbon reduction initiatives. The research shows the importance of adopting a broader supply chain approach to decarbonisation in the maritime sector and emphasises the need for a multi-stakeholder perspective that recognises the important role of the shipper in the process.

Business environment factors, incoterms selection and export performance, Hien, N., Laporte, G., & Roy, J. (2009). Business environment factors, incoterms selection and export performance. Operations and Supply Chain Management, 2(2), 63-78. The objective of this study is to identify the main factors taken into consideration when deciding which Incoterms to use and to analyze the impact of the choices of Incoterms on export performance. The results highlight the importance of considering both the internal and external business environments in the selection process for Incoterms and its contribution to improved export performance. In addition, this article shows the importance of training to increase the awareness of the strategic dimension of Incoterms and to promote the utilization of Incoterms which also enhance export performance.

The impact of Incoterms 2010, Gibbons, G. (2010). The impact of Incoterms 2010. IBLQ, 4, 15.

International commercial terms-Incoterms 2010, Eldovića, E., Vukašinovića, M., Tešića, M., & Bijelić, S. (2015). International commercial terms-Incoterms 2010. In 2nd Logistics International Conference, Belgrade, Serbia. Google Scholar. The Incoterms are a set of International rules that provide an interpretation for the most used commercial terms in foreign trade operations. The aim of Incoterms is standardization and interpretation of contractual trade terms. In this paper Incoterms are presented in more detail and explained through theory and practical application in certain situations. We shall review the changes made in the new compilation of terms, Incoterms 2010, and their impact in both local and international trade.

An empirical analysis on the performance of the third-party logistics in the Korean exporter, Park, Y. H., & Jeong, Y. S. (2016). An empirical analysis on the performance of the third-party logistics in the Korean exporter. Journal of Korea Trade, 20(1), 97-114. – This study provides evidence that exporters’ evaluation on the customization of LSPs’ service capacities, the reasonability of LSPs’ service fees and the information sharing are three important prerequisites to CR between exporters and LSPs. This study is focussed on exporters’ performance such as consistency of secure delivery (SD), exporters’ logistics cost savings (CS) and exporters’ satisfaction. The results show a strong support for this study, with positive and significant effects of CR on the consistency of SD, exporters’ logistics CS and exporters’ satisfaction.

Incoterms 2010: what you really need to know, Lane, S. (2012). Incoterms 2010: what you really need to know. Business Credit, 114(6), 8.

International Commercial Transactions, Franchising, and Distribution, Rosenberg, A. S., Ray, N., Palmisano, K. A., & Peter, L. A. (2011). International Commercial Transactions, Franchising, and Distribution. Int’l Law., 45, 191.

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