Understanding Carriage and Insurance Paid to or CIP in International Trade
Definition & Meaning
Carriage and Insurance Paid to, commonly referred to as CIP, is a term used in international sales contracts. Under this term, the seller is responsible for delivering goods to a specified destination. The seller selects the transportation method and covers the costs associated with shipping the goods to that location. Additionally, the seller is responsible for clearing the goods for export and must obtain insurance to protect against potential loss or damage during transit. The risk associated with the goods transfers from the seller to the buyer once the goods are handed over to the first carrier.
Legal Use & context
CIP is primarily used in international trade and sales agreements. It falls under the category of Incoterms, which are internationally recognized rules that define the responsibilities of buyers and sellers. Understanding CIP is essential for parties involved in cross-border transactions, as it outlines the obligations regarding shipping and insurance. Users can manage their contracts effectively using legal templates provided by services like US Legal Forms, ensuring compliance with international trade regulations.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A company in the United States sells machinery to a buyer in Germany. Under a CIP agreement, the seller arranges for the machinery to be shipped via sea freight, pays for the shipping costs, and obtains insurance for the journey. Once the machinery is handed over to the shipping company, the risk is transferred to the buyer.
Example 2: A textile manufacturer in India sells fabric to a retailer in Canada. The manufacturer chooses an air freight carrier, pays for the transport, and secures insurance for the shipment. The risk is transferred to the Canadian retailer when the fabric is delivered to the airline.