CIP and CIF are two important conditions mentioned in Incoterms 2020, which are effective from January 1, 2020. There are many differences between these two conditions.
- CIP condition (Carriage & Insurance Paid To): Freight and insurance paid to the named destination.
- CIF condition (Cost, Insurance & Freight): Cost, insurance, and freight.
1. Regarding how to write on the contract:
- How to write CIP: CIP [Named Place of Destination] Incoterms 2020.
- How to write CIF: CIF [Named Port of Destination] Incoterms 2020.
2. Regarding the seller’s responsibilities
2.1. CIP condition
- Deliver the goods cleared for export to the named destination. To do this, the seller will perform the following tasks:
- Produce, package, and ensure sufficient quantity of goods to be pulled out of the port of export according to the schedule.
- Export clearance.
- Sign a transport contract to the buyer’s address (international transport, domestic import…).
- Support the provision of import documents as requested by the buyer for import clearance.
- Sign an international transport contract with the highest terms for the buyer to enjoy (Type A clause).
2.2. CIF condition
Deliver the goods cleared for export to the port of destination designated by the buyer. Specifically, the seller will perform the following tasks: Produce and package goods in accordance with the agreement in the contract, transport goods from the warehouse to the port of export to carry out export clearance, sign an international transport contract to transport goods from the port of export to the designated port of import. The seller is responsible for purchasing transport insurance for the beneficiary, who is the buyer. Under CIF, Incoterm 2020, the seller is responsible for purchasing insurance at the highest level for the beneficiary.
3. Regarding the buyer’s responsibilities
3.1. CIP condition
- Import clearance.
- Receive goods at the carrier’s location where the seller delivers the goods.
- Unload goods from the means of transport to the consumption warehouse (if agreed that the carrier hired by the seller must unload the goods, the buyer does not have to unload the goods from the means of transport anymore).
3.2. CIF condition
The buyer is responsible for unloading the goods from the vessel at the destination port, completing import clearance procedures, transporting the goods from the port of import to the buyer’s warehouse for consumption, and paying the suppliers. The buyer is advised to request that the seller purchase insurance at the highest level. If the buyer is not confident in the goods, they can proactively purchase additional insurance for international transport.
4. Regarding the transfer of risk location
4.1. CIP condition
The risk is transferred from the seller to the buyer when the goods are delivered to the first carrier. Therefore, the seller is responsible for delivering the goods to the designated destination but does not guarantee the safety of the goods.
4.2. CIF condition
The risk is transferred from the seller to the buyer as soon as the goods are successfully delivered on board the ship.
