One of the 11 Incoterms 2020 rules published by the International Chamber of Commerce. It is a C-group shipment term for any mode of transport, including air, rail, road, sea, and multimodal combinations. The seller contracts and pays carriage to a named place of destination and must buy cargo insurance covering the buyer’s risk at least that far. Delivery and the transfer of risk happen much earlier: when the goods are handed to the first carrier (or otherwise delivered as agreed), not when they arrive.
How Risk and Cost Split
The named destination is a cost point, not a risk point. The seller has shipped once the first carrier takes the goods. From that moment the buyer bears loss or damage in transit, even though the seller is still paying freight and insurance to the agreed place.
The seller typically:
- Packs and exports: Prepares, packs, and marks the goods, then completes export clearance and licenses.
- Delivers at origin: Hands the goods to the first carrier at the agreed place. That handover is delivery, and it is when risk transfers.
- Pays carriage: Contracts and pays transport to the named place of destination, which may be a port, airport, inland terminal, or the buyer’s premises.
- Insures the buyer’s risk: Arranges cover from the delivery point at least to that named destination, with the policy or certificate issued so the buyer can claim.
- Provides documents: Furnishes the usual transport document plus proof of insurance.
The buyer typically:
- Bears transit risk: Takes the risk of loss or damage from first-carrier handover onward.
- Clears import: Completes import formalities, duties, taxes, and any transit customs.
- Handles destination costs: Pays unloading and any on-carriage beyond the named place unless the contract says otherwise.
Insurance Cover Under Incoterms 2020
Only two of the 11 rules require the seller to purchase cargo insurance: this one and Cost, Insurance, and Freight (CIF). Incoterms 2020 raised the default cover here from Institute Cargo Clauses (C) to Institute Cargo Clauses (A) or equivalent, often described as all-risks cover. CIF stayed at Clauses (C), which is minimum named-perils cover.
Unless the parties agree otherwise, the seller’s policy should:
- Match Institute Cargo Clauses (A) or an equivalent all-risks form.
- Insure at least 110% of the contract price, in the currency of the contract.
- Cover the buyer’s risk from the origin delivery point at least to the named destination.
- Be issued in favor of the buyer (or another party the buyer names) so the buyer can claim directly.
All-risks cover is still subject to policy exclusions, conditions, and deductibles. It does not pay every possible loss. Typical exclusions include delay, ordinary wear, and inherent vice; war and strikes usually need separate extensions.
CIP Compared with CIF and FOB
Importers often treat a seller-paid freight quote as a delivered price. Under C rules it is not. Free On Board (FOB) also transfers risk at origin, but the buyer books and pays main carriage and is not given a seller-purchased policy by the rule.
| Factor | CIP | CIF | FOB |
| Transport mode | Any mode, including multimodal | Sea and inland waterway only | Sea and inland waterway only |
| Who pays main carriage | Seller, to the named destination | Seller, to the named port of destination | Buyer |
| Seller insurance duty | Mandatory | Mandatory | None under the rule |
| Default cover (2020) | Institute Cargo Clauses (A), at least 110% | Institute Cargo Clauses (C), at least 110% | Buyer arranges cover if wanted |
| Risk transfers | When goods are handed to the first carrier | When goods are on board at the port of shipment | When goods are on board at the port of shipment |
| Named place | Place of destination (can be inland) | Port of destination | Port of shipment |
| Containerized cargo | Recommended C-term | Generally a poor fit | Generally a poor fit; use FCA instead |
| Import clearance, duties, unloading | Buyer, unless otherwise agreed | Buyer, unless otherwise agreed | Buyer |
The ICC treats this rule as the appropriate C-term for containerized and multimodal cargo. CIF assumes the seller can load the goods on board a vessel, which does not match how containers are handed to a carrier at a terminal, often days before loading. When the buyer wants to choose the carrier and buy its own insurance, Free Carrier (FCA) is the usual F-group counterpart. Carriage Paid To (CPT) uses the same cost-and-risk split without a seller insurance duty. Cost and Freight (CFR) is the sea-only sibling of CIF without that insurance duty.
Writing the Named Place
Incorporate the rule as CIP [named place of destination] Incoterms® 2020. Name a precise destination (terminal, airport, inland depot, or street address), not a country. Example: CIP Buyer’s warehouse, Chicago, Illinois, United States, Incoterms® 2020.
Also agree the place of delivery at origin, because that is where risk actually passes. Naming a farther destination only extends the seller’s freight and insurance spend. It does not keep risk on the seller until arrival.
