In-depth analysis of CIP terminology: division of responsibilities between transportation and insurance

In international trade, the term CIP (Carriage and Insurance Paid to…named place of destination) marks an important contract delivery method and is applicable to multiple modes of transportation. According to the General Principles 2000, when using the CIP terminology, the buyer and seller need to clarify their respective obligations in the contract, especially the responsibilities for transportation and insurance.

1. The seller’s main responsibilities and obligations

Under the CIP term, the seller not only has to comply with the same obligations as under the CPT term, but also insures against loss or damage that may occur to the goods during transportation. Therefore, the seller shall be responsible for:

• Apply for a carriage contract: Pay the usual shipping charges.
• Enter an insurance contract: Purchase appropriate freight insurance and pay the insurance premium [1] [2].

The seller’s delivery is completed when the goods are handed over to the designated carrier.

2. Risk and insurance issues

A key point covered by the CIP terminology is the manner in which risk is transferred. In a CIP contract, although the seller is responsible for handling freight insurance, the transportation risk from the delivery point to the destination is actually borne by the buyer. The seller’s insurance behavior is of an agency nature, and the insurance amount is usually determined by adding 10% to the contract price [1] [2].

3. Reasonable determination of price

Under CIP conditions, the seller needs to bear more responsibilities and expenses, including:

• Transportation costs for shipping goods from the place of delivery to the destination.
• Relevant freight insurance costs.

Therefore, the seller must carefully calculate various costs when quoting, and take into account the transportation distance, insurance coverage and charges of various transportation methods. At the same time, the expected changes in freight rates and insurance costs are also necessary considerations [1] [2].

4. The difference between CIP and CIF

Although CIP and CIF are similar in some respects (for example, their composition includes the usual freight and agreed insurance), they have significant differences in the place of delivery, risk allocation, and liability and expense:< /p>

• Differences in applicable transportation methods: CIF is suitable for water transportation, while CIP is suitable for different transportation methods.
• The critical point of risk transfer is different: In the case of CIF, the risk is transferred to the buyer once the goods are loaded at the port of shipment; in the case of CIP, the risk is at the moment when the carrier takes control of the goods. Transfer to buyer.
• Difference in cost burden: In the CIF term, the seller is only responsible for the cost of chartering the ship and from the loading port to the destination port; while in the CIP term, the seller is responsible for the cost from the delivery point to the destination. The full cost and corresponding freight insurance [1] [2].

Through the above analysis, it can be seen that CIP terminology plays an indispensable role in international trade, and reasonable division of risks and responsibilities is crucial to both buyers and sellers.