CIP

CIP is the multimodal equivalent of CIF. The seller arranges and pays for transport and insurance to the named destination, regardless of mode (sea, air, road, rail, or any combination). The critical asymmetry is that risk transfers to the buyer when the cargo is handed to the first carrier in the country of origin, not at the destination. Cost transfer happens at destination; risk transfer happens at origin. This split confuses first-time buyers more often than any other Incoterm rule.

What CIP Houston actually covers and what it doesn’t

Under CIP Houston (or CIP Frankfurt, or CIP Sydney), the Chinese seller is responsible for:

• Producing the goods to specification
• Export packaging including UN-certified packaging for DG cargo
• Inland transport from factory to the first carrier’s facility
• Chinese export customs clearance
• Multimodal carriage to the named destination (sea freight, air freight, or combinations)
• Marine cargo insurance to ICC Clauses A standard (the upgraded cover, see below)
• Producing the bill of lading or air waybill, commercial invoice, packing list, COA, and MSDS

The seller is not responsible for:

• Destination customs clearance
• Import duties, VAT, and destination taxes
• Final delivery from the carrier’s destination terminal to the buyer’s site
• Unloading

The Incoterms 2020 insurance upgrade

Before 2020, both CIF and CIP required only minimum-cover insurance. Institute Cargo Clauses C, which covers a narrow set of named perils (fire, vessel sinking, collision, jettison). Under Incoterms 2020 the rule changed for CIP only. CIP now requires the seller to buy Institute Cargo Clauses A, which is all-risks cover. CIF stayed at the minimum.

This matters because CIP is used for higher-value and air-freighted cargo where buyers expect broader insurance. The 2020 upgrade aligns CIP cover with what most buyers were paying for separately under the old rule. If you are still seeing CIP quotes that explicitly cite “minimum cover” or “ICC Clauses C,” the seller is using the pre-2020 rule. Push back and ask for ICC Clauses A.

The risk-vs-cost-transfer split that catches buyers

CIP is widely misunderstood as “everything is the seller’s problem until destination.” It is not. The seller’s cost obligation runs to destination. The seller’s risk obligation ends at the first carrier in the country of origin. If the cargo is damaged en route, the buyer claims under the cargo policy that the seller bought and assigned. The buyer is the loss payee, but the buyer is also the party that has to pursue the claim.

Practical implication: the buyer should always confirm three things before the cargo ships under CIP.

1. The insurance policy is genuinely ICC Clauses A. Get the certificate before the cargo dispatches.
2. The buyer is named as loss payee on the policy. Otherwise the claim recovery has to go through the seller.
3. The buyer’s own marine cover does not double up. Many buyers run an annual marine policy that already covers inbound shipments. Under CIP the seller’s policy and the buyer’s policy can both attach, leading to a “first loss” dispute between underwriters.

When CIP is the right choice

CIP works well when:

1. The cargo is air-freighted or moves multimodal sea-air. CIF is sea-only; CIP covers any transport mode.
2. The buyer wants the seller to handle freight booking but does not want to manage insurance. Common for first-time air-freight chemical orders.
3. Containerised cargo moving from inland Chinese factories where the first leg is rail or road, not sea. CIP captures the multimodal character of the journey.

When CIP is the wrong choice

CIP is inappropriate when:

1. The cargo is sea-only and the buyer has an annual marine policy. Use FOB or CFR with the buyer’s policy. CIP overpays for insurance the buyer already has.
2. The buyer needs control over the carrier choice. Under CIP the seller picks the carrier. For high-value or DG cargo where the buyer wants to specify the carrier and routing, FOB or FCA is better.

Related Incoterms

CIF: sea-only equivalent. Cheaper insurance (ICC Clauses C). CPT: same risk-transfer point as CIP but no insurance obligation on the seller. FCA: seller delivers to first carrier; buyer takes everything from there.