Procurement Glossary
CIP (Carriage and Insurance Paid to): Definition and application in Procurement
November 19, 2025
CIP (Carriage and Insurance Paid to) is one of the eleven Incoterms clauses that regulate delivery terms in international trade. This clause precisely defines the distribution of costs and transfer of risk between the seller and buyer in cross-border transport. CIP is particularly relevant for buyers, as it offers planning security in terms of transport costs and insurance coverage. Find out below what CIP means, how it works, and what strategic advantages this Incoterm clause brings to your company.
Key Facts
- CIP is one of the multimodal Incoterms and can be used for all modes of transport.
- The seller bears the transport and insurance costs to the agreed destination.
- Risk transfer occurs upon handover to the first carrier, not at the destination
- Minimum insurance coverage complies with Institute Cargo Clauses (C) or comparable standards
- Buyer handles import customs clearance and local unloading at the destination
Contents
Definition and meaning of CIP
CIP defines a delivery term whereby the seller assumes comprehensive transport obligations and at the same time guarantees insurance coverage.
Basic features of CIP
In CIP deliveries, the seller organizes and pays for the transport of the goods to the agreed destination. In addition, the seller takes out transport insurance in favor of the buyer. The clause is suitable for all types of transport and combinations, including container transport and multimodal logistics chains.
CIP versus other Incoterms
Compared to CPT (Carriage Paid To), CIP additionally includes the seller's obligation to insure the goods. Compared to CIF (Cost, Insurance and Freight), CIP is more flexible as it is not limited to sea transport. The main difference to DAP (Delivered at Place) lies in the earlier transfer of risk with CIP.
Importance of CIP in Procurement
For purchasing organizations, CIP offers cost transparency and reduces the administrative effort involved in international procurement. The seller's responsibility for transport and insurance enables precise budget planning and minimizes unforeseen logistics costs.
Process, control and planning
The successful implementation of CIP deliveries requires structured processes and clear responsibilities among all parties involved.
Contract design and agreements
In CIP contracts, the exact destination and insurance conditions must be precisely defined. The agreement should specify the minimum insurance coverage and, if necessary, stipulate extended coverage. In addition, delivery dates and shipping notifications must be regulated.
Transportation organization and monitoring
The seller organizes the entire transport and selects suitable carriers. However, buyers should still implement tracking systems and request regular status updates. Coordination with logistics service providers ensures smooth processes.
Document management and customs clearance
Although the seller organizes the transport, the buyer is responsible for import customs clearance. Accordingly, all necessary documents, such as commercial invoices and proofs of origin, must be provided in good time.
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Operational KPIs for CIP
Measuring CIP performance requires specific key performance indicators that take into account both cost and service aspects.
Transportation costs and budget deviations
Monitoring actual transport costs in relation to agreed CIP prices reveals cost trends. Deviation analyses identify potential for optimization and support negotiations with suppliers. Hidden costs such as demurrage charges should also be recorded.
Delivery reliability and transport times
On-time delivery is a critical success factor in CIP transactions. KPIs such as on-time delivery rate and average transport time enable the evaluation of supplier performance. Delays should be categorized according to cause and analyzed systematically.
Claims ratio and insurance benefits
The frequency and value of transport damage, as well as the efficiency of claims settlement, are important quality indicators. A low claims ratio is indicative of professional transport handling, while fast settlement preserves liquidity. This data is included in the supplier evaluation.
Risks, dependencies and countermeasures
CIP deliveries involve specific risks that can be minimized by taking appropriate measures.
Insurance gaps and claims
The standard insurance coverage provided by CIP is only minimum coverage and may be insufficient for high-value goods. Buyers should check the scope of insurance coverage and take out additional insurance if necessary. In the event of damage, clear processes must be in place to ensure that claims are settled quickly.
Supplier dependency and quality control
Transferring responsibility for transport to the seller can lead to limited control over delivery quality and deadlines. Regular carrier performance evaluations and service level agreements can help remedy this situation. Alternative suppliers should be available as a backup option.
Customs and compliance risks
Incorrect or incomplete customs documents can lead to delays and additional costs. Close cooperation with experienced customs agents and the implementation of compliance checks minimize these risks. Regular training of the purchasing team on current customs regulations is recommended.
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Practical example
A German mechanical engineer purchases electronic components from Taiwan under CIP terms. The Taiwanese supplier arranges air freight transport to Frankfurt and takes out transport insurance covering 110% of the value of the goods. Upon arrival, the buyer takes over customs clearance and onward transport to the factory. The CIP agreement gives the buyer cost certainty and allows them to calculate precisely, while the supplier can make optimal use of their logistics expertise.
- Clear cost allocation enables precise budget planning
- Insurance coverage minimizes financial risks in the event of transport damage
- Focusing on core competencies through task sharing
Current developments and effects
The application of CIP is constantly evolving, driven by technological innovations and changing market requirements.
Digitization of transport processing
Modern IT systems enable the complete digitization of CIP processes. Electronic waybills, automated tracking updates, and AI-supported route optimization significantly improve efficiency. Blockchain technology creates additional transparency in document tracking and reduces the risk of fraud.
Sustainability aspects and green logistics
Environmental awareness is increasingly influencing the choice of transport mode for CIP deliveries. Companies prefer low-carbon modes of transport and require corresponding evidence from their suppliers. The integration of sustainability criteria into supplier evaluations is becoming standard practice.
Impact of global supply chain disruptions
Pandemic-related disruptions and geopolitical tensions have reinforced the importance of flexible CIP agreements. Companies are developing more resilient procurement strategies with alternative transport routes and extended insurance coverage. Risk management is becoming an integral part of CIP planning.
Conclusion
CIP offers purchasing organizations a good balance between cost control and risk minimization in international procurement. The combination of transport costs being covered by the seller and simultaneous insurance coverage creates planning security and reduces administrative complexity. However, successful CIP application requires precise contract drafting and continuous performance monitoring. In an increasingly digitalized and sustainability-oriented logistics world, CIP will continue to gain importance as a flexible Incoterm solution.
FAQ
What exactly does CIP mean, and when is it used?
CIP stands for "Carriage and Insurance Paid to" and refers to an Incoterm clause whereby the seller is responsible for transport and insurance to the agreed destination. It is mainly used for international deliveries when the buyer wants cost certainty but wishes to handle the import process themselves.
Who bears the risk for CIP deliveries?
The transport risk is transferred to the buyer as soon as the goods are handed over to the first carrier, not only at the destination. However, the seller is obliged to take out transport insurance in favor of the buyer to cover this risk.
What is the minimum insurance required for CIP?
The seller must take out at least insurance in accordance with the Institute Cargo Clauses (C) or comparable standards. This minimum coverage comprises 110% of the invoice value and covers basic transport risks. Extended insurance should be arranged for high-value goods.
How does CIP differ from other Incoterms?
CIP combines the transport cost coverage of CPT with the insurance obligation of CIF, but unlike CIF, it is suitable for all modes of transport. Unlike DAP or DDP, the seller's responsibility does not end at the destination, but already at the first transfer to the carrier.
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