Procurement Glossary
Incoterms CIP: Definition, application and meaning in Procurement
November 19, 2025
Incoterms CIP (Carriage and Insurance Paid to) is an international trade clause that regulates the distribution of costs and risks between buyer and seller in the transportation of goods. This delivery clause obliges the seller to bear the transportation costs and insurance up to the agreed destination. Find out below what Incoterms CIP means, how it is implemented in practice and the strategic advantages for Procurement .
Key Facts
- CIP stands for "Carriage and Insurance Paid to" and is one of the C clauses of the Incoterms
- Seller bears transportation costs and insurance to destination
- Risk is already transferred upon handover to the first carrier
- Suitable for all types of transportation, especially multimodal transport
- Minimum insurance cover corresponds to clause C of the Institute Cargo Clauses
Contents
What is Incoterms CIP?
CIP defines a delivery clause in which the seller assumes comprehensive transportation obligations.
Basic features of CIP
In the case of CIP, the seller assumes the costs for transportation and insurance to the agreed destination. However, the risk is transferred when the goods are handed over to the first carrier. This separation of transfer of costs and risk is characteristic of all C-clauses.
- Seller organizes and pays for transport to the destination
- Minimum insurance cover of 110% of the invoice value
- Buyer bears risk from handover to carrier
CIP compared to other Incoterms
In contrast to CPT, CIP requires the seller to take out insurance. While only sea transportation is possible with CIF, CIP is suitable for all types of transportation. The distribution of risk differs significantly from DAP, where the risk remains with the seller until arrival.
Importance of CIP in Procurement
For buyers, CIP offers planning security for transportation costs and basic insurance cover. The clause enables a clear cost calculation, as transport insurance and freight are already included in the purchase price. At the same time, buyers retain control over the risk from dispatch.
Requirements and implementation of Incoterms CIP
The successful application of CIP requires precise contract design and clear agreements between the parties.
Contractual requirements
The place of destination must be clearly defined, as this is where the seller's responsibility for costs ends. In the case of customs clearance, the buyer is responsible for import processing and costs. The insurance must cover at least 110% of the invoice value.
- Precise location for cost sharing
- Determine the scope and conditions of insurance
- Define documentation obligations
Practical implementation in transportation
The seller organizes the entire transport and hands over relevant documents such as the air waybill or bill of lading to the buyer. The insurance policy is also transferred to cover claims. Buyers should take the transfer of risk into account when inspecting incoming goods.
Documentation and compliance
Complete transport documents and proof of insurance are essential for smooth processing. For international shipments, commercial invoices and, where applicable, proof of preference are also required. Proper documentation also facilitates subsequent claims.
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Compliance key figures and quotas
Relevant key figures enable the evaluation of CIP performance and the identification of optimization potential.
Key transport cost figures
The ratio of transport costs to the value of goods shows the efficiency of the CIP agreements. Average transport costs per shipment and kilometer enable benchmarking with alternative delivery clauses. Regular analysis helps to optimize transport routes and partners.
- Transportation costs as a percentage of total value
- Cost per unit of weight or volume
- Comparison with standard market rates
Insurance and loss ratios
The loss ratio in relation to insurance premiums assesses the adequacy of the insurance cover. The frequency and amount of transport damage reveal key risk areas. The settlement time of claims influences liquidity and customer satisfaction.
Compliance indicators
Punctuality rates and document completeness measure the quality of CIP processing. Delays in customs clearance or missing documents affect the supply chain. Regular audits of transport partners ensure compliance with agreed standards.
Compliance risks and controls for Incoterms CIP
The use of CIP entails specific risks that can be minimized through suitable control mechanisms.
Insurance risks and gaps
Insufficient insurance cover can lead to considerable losses in the event of transport damage. The minimum cover of 110% does not cover all cases of damage, especially in the case of special goods or special risks. Buyers should check additional insurance policies and identify gaps in cover.
- Assessment of the minimum insurance cover
- Examination of exclusion clauses
- Supplementary insurance for special risks
Transfer of risk and delimitation of liability
The separation of cost and risk transfer often leads to misunderstandings. Damage after handover to the carrier is borne by the buyer, even though the seller organizes the transport. Clear agreements on the transfer of risk are therefore essential.
Compliance for international transports
Customs regulations and export controls must be observed for CIP transactions. The buyer is responsible for proper customs clearance at the destination. Violations of trade regulations can lead to delays and penalties.
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Practical example
A German mechanical engineering company purchases electronic components from Taiwan under CIP conditions. The Taiwanese supplier organizes the transport by air freight to Frankfurt and takes out transport insurance for 110% of the invoice value. The risk is transferred to the airline in Taipei upon handover, while the supplier bears the transportation costs to Frankfurt. On arrival, the German buyer takes care of customs clearance and further distribution.
- Clear division of costs between the parties
- Insurance cover for air transportation
- Efficient customs clearance thanks to local expertise
Current developments and interpretation of Incoterms CIP
The use of CIP is constantly evolving, influenced by technological innovations and changing retail structures.
Digitization of transport documentation
Electronic bills of lading and digital insurance policies simplify CIP processing considerably. Blockchain-based solutions enable transparent tracking of cost allocation and risk transfer. AI-supported systems optimize the automatic allocation of transport costs and insurance premiums.
- Electronic document transfer
- Automated cost accounting
- Transparent risk tracking
Sustainability aspects in CIP transport
Environmentally friendly transportation options are becoming increasingly important in CIP agreements. Sellers are increasingly integrating CO2-neutral transportation solutions into their cost calculations. The insurance of sustainable means of transport requires adapted policies and valuation procedures.
Adjustments due to Incoterms 2020
The current version specifies insurance requirements and extends applicability to modern forms of transportation. Special attention is paid to multimodal transportation and the integration of different carriers. The regulations on safety requirements have been adapted to current standards.
Conclusion
Incoterms CIP offers a balanced solution for international trade transactions by keeping transportation costs with the seller while transferring the risk to the buyer at an early stage. The integrated insurance obligation provides basic protection, but requires careful consideration of the scope of cover. For strategic Procurement , CIP enables predictable transportation costs with flexibility in risk assessment. Successful application requires clear contract design and competent processing.
FAQ
What does CIP mean for Incoterms?
CIP stands for "Carriage and Insurance Paid to" and means that the seller pays for transportation and insurance up to the agreed destination. However, the risk is transferred to the buyer when the goods are handed over to the first carrier. This clause is suitable for all types of transportation.
Who bears the customs costs for CIP?
With CIP, the buyer bears all import duties and taxes at the destination. The seller is only responsible for export duties and formalities in the country of dispatch. Customs clearance requires appropriate expertise and can affect the delivery time.
What insurance is required for CIP?
The seller must take out transport insurance for at least 110% of the invoice value. The cover corresponds to the Institute Cargo Clauses (C), which cover basic risks such as fire, explosion and accidents involving the means of transport. Additional insurance can be arranged for extended cover.
When is CIP the right choice?
CIP is particularly suitable for buyers who want to keep transportation costs predictable but retain control over the risk. The clause is advantageous in the case of trusting supplier relationships and if the seller can achieve better transport conditions. Multimodal transportation is optimally supported.
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