What's The Difference Between CIF and CIP - Global Logistics Know How

3/24/2021 What's the Difference between CIF and CIP?
- Global Logistics Know How
What’s the Difference between CIF and CIP?

Written by kelvinsee ● in Shipping
Table of Contents 
1. Introduction
2. Mode of Transportation
3. Transfer of Transport Responsibility
4. Insurance Coverage of CIP and CIF
5. Transfer of Risk of CIP and CIF
5.1. Case Example for Transfer of Risk
6. References:
Introduction
https://maxfreights.com/whats-the-difference-between-cif-and-cip/ 1/11
3/24/2021 What's the Difference between CIF and CIP? - Global Logistics Know How
The subtle differences between INCOTERM CIF and CIP seem minuscule at first until you
closely inspect and compare the two in several aspects. After rigorous mouse clicks and
research about both the INCOTERM Rules, we surmise that the two look rather different.
Before that, we have to point out that the best description of all 12 INCOTERMs can only be
accurately described by the people responsible in drafting the Rules, the International
Chambers of Commerce (ICC) came up with the INCOTERM in order to eliminate any
ambiguity in trading between the buyer and the seller.
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Here are the aspects we will look into to decipher the difference between CIF and CIP
CIF 2020 CIP 2020
Cost, Insurance and

Description Carriage and Insurance Paid To
Freight
Mode of
Sea Transport Only All Mode of Transport
Transportation
Transfer of Once the cargo has Once the cargo has arrived at an
Transportation arrived at Sea Port of agreed destination at the
Responsibility Discharge Country of Discharge
Coverage up to the
Insurance Coverage up to the agreed destination
Sea Port of
Coverage at the Country of Discharge
Discharge
At the Sea Port of Once Cargo is transferred to

Transfer of Risk
Discharge First Carrier
CIF Arrangement, Source: www.incotermsexplained.com
CIP Arrangement, Source: www.incotermsexplained.com
Mode of Transportation
This is the easy part; CIF 2020 is classified for sea transportation only.
Whereas CIP 2020 is used for all modes of transportation, whether it is the sea, air, railway, or
road.
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Transfer of Transport Responsibility

With CIF 2020, the seller takes the responsibility for transporting the cargo from the seller’s
factory to the seaport of discharge.
Once the cargo is staged at the port’s container yard, effectively the responsibility of
transporting the cargo from the destination’s port yard to the final destination lies on the buyer.
With the CIP 2020, the seller takes the responsibility for transporting the cargo to a named
destination of the buyer’s choice. Since CIP includes all modes of transportation, it could be an
airport terminal, a railway terminal, a container depot yard, or a warehouse of the transporter’s
choice.
Insurance Coverage of CIP and CIF

Both CIF and CIP INCOTERMS requires the seller to purchase the insurance
on behalf of the buyer.
It is clearer with CIF, as the seller agrees to purchase marine insurance to cover the journey up
to the seaport of destination.
On the other hand, although CIP generally sets upfront that the seller is
required to purchase insurance, there are no hard rules on how much
coverage minimum is required.
This is important as the risk of ownership of the goods transported is different between CIF and
CIP, which we will explore further below.
Marine Cargo Insurance has 3 forms of coverage, Institute Class (A), Institute Class (B), and
Institute Class (C).
Class A is the most extensive coverage therefore the most expensive whereas Class C is less
extensive and demands lower insurance premiums.
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A seller can get a Class (C) coverage and still fulfill the requirements set in the INCOTERM
Rule unless the buyer explicitly requires other forms of insurance coverage.
We covered the benefits of marine cargo insurance at length in this post, have a look at it if you
need a clearer picture.
Transfer of Risk of CIP and CIF

The transfer of risk does not mean the same thing as the transfer of transport responsibility. You
might realize we specifically avoid using the term “Transfer of ownership” to describe the
transfer of risk too. All the three from of “transfers”, we argue are separate and we don’t want to
confuse our readers of the three.
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Transfer of ownership is where the possession of goods is transferred from one party to
another, usually a documentary transfer with a Bill of Lading Form.
On the other hand, the Transfer of transport responsibility is where the responsibility of
moving the cargo has been transferred from one party to another.
the Transfer of Risk is where the risk of moving cargoes is transferred from one party to
another, as dictated by the INCOTERM rule arranged.
Ideally, the transfer of transport responsibility, transfer of risk and transfer of ownership
happens at the exact same point to avoid any ambiguity. But the transfer of ownership and the
transfer of risk sometimes happen at different points of the transportation journey.
The key distinction between CIF and CIP is that although in a CIP term the
seller arranges the carriage of goods to a named destination, plus insurance,
the seller’s risk of transportation is transferred to the carrier once the first
carrier has picked up the cargo.
To reiterate, yes the seller pays for the transportation, but at the risk of the buyer.
Case Example for Transfer of Risk

For example, in a Free on Board or (FOB) shipment, the seller is responsible for
transferring the cargo to the port, clearing customs for export and stage the container onto the
booked vessel.
Once the container is “shipped on board”, detailed in the Bill of Lading, the seller
then arranges the Original Bill of Lading to be couriered to the buyer once he receives the
payment.
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In this scenario, the shipment term is FOB, the buyer arranges the freight booking with their
own contracted agent.
At this specific point, before the Original Bill of Lading reaches the hand of
the buyer, the ownership of the goods is not yet transferred to the buyer,
however, the risk of transportation has been transferred to the buyer as
determined by the INCOTERM.
If there is cargo damage on board of the vessel, and the damage is proved to be damaged by
the carrier, the buyer cannot argue that he/she hasn’t had ownership of the goods yet if the Bill
of Lading hasn’t reached him. He can only lay the damage claim to the ocean carrier he was
responsible to arrange.
References:
Graphic contribution: incotermsexplained.com
www.iccwbo.org
kelvinsee
Hello! I'm Kelvin, I work as a custom broker and I'm thrilled with having the experience to share
my industry knowledge with you. I hope that you enjoy reading them as much as I do posting
them.
One thought on “What’s the Difference between CIF and

CIP?”
Barbara Schultz says:
January 6, 2021 at 9:03 am
Hi Kevin,
Thank you for the information. It was clear.
Reply
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3/24/2021 What's the Difference between CIF and CIP?

- Global Logistics Know How

What’s the Difference between CIF and CIP?

Gul Ahmed Ideas Sale

CIF 2020 CIP 2020

Cost, Insurance and

At the Sea Port of Once Cargo is transferred to

CIF Arrangement, Source: www.incotermsexplained.com

CIP Arrangement, Source: www.incotermsexplained.com

Transfer of Transport Responsibility

Insurance Coverage of CIP and CIF

coverage minimum is required.

Hope offer new design RF Lora Module.

Transfer of Risk of CIP and CIF

Gul Ahmed Ideas Sale

Case Example for Transfer of Risk

One thought on “What’s the Difference between CIF and

Malaysia Timber Export or Import Requirements

Letter of Credit Process and Procedure

The cost of real estate in

© 2021 Copyright Global Logistics Know How

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