CIP vs CIF: Differences Between Incoterms

CIP vs CIF Incoterms 2020: What is the difference between CIF and CIP?

Carriage and Insurance Paid To (CIP) and Cost, Insurance, and Freight (CIF) are two Incoterms from 2020 used for international trade. Read this guide to find out the differences between CIF and CIP to decide which is better for your shipment and prepare to export and import cargo more efficiently.

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What is the difference between CIF and CIP?

The main difference between CIP and CIF is that CIF applies to sea freight only, while CIP can be used for any mode of transport.

Another significant difference is the risk transfer. Under CIF, the risk transfers from the seller to the buyer when the goods are loaded on board the vessel in the port of origin. When shipping under CIP, the seller assumes the risk until goods are delivered to the first carrier at a named location.

When using CIP and CIF Incoterms, the seller is responsible for purchasing insurance and paying freight costs.

Read more:

CIF vs CIP – Pros and cons of each Incoterm

Advantages and disadvantages of shipping under CIF

For the buyer:

CIF is a good choice when the buyer does not have experience in dealing with export processes in the country of origin and obtaining insurance. Thus, it implies fewer responsibilities for the buyer. Compared to CIP, CIF is more limiting since it should only be used for non-containerised cargo transported by sea, while CIP can be used for all modes of transport.

For the seller:

Under CIF, the seller will need to cover the freight and insurance costs, while the risk will transfer once the goods are on board the ship. CIF Incoterm can be very convenient for sellers because it allows them to charge additional services without adding risk. Therefore, the seller may negotiate the higher price of the invoice if having good contracts with freight forwarders and insurance companies.

Advantages and disadvantages of shipping under CIP

For the buyer:

As with CIF, the buyer assumes less responsibility for shipping internationally and gets the cargo delivered to the named location. However, with CIP, the buyer has more flexibility to ship goods by any means of transport. The main disadvantage of CIP for the buyer is bearing the risk for the cargo as soon as it is passed to the first carrier and till its destination.

For the seller:

Although the seller is obligated to purchase insurance, the risk transfer occurs before the main carriage. In case of damage during transport, the buyer will need to make a claim through the insurance company selected by the seller. Like CIF, CIP is advantageous for the seller because they can charge a higher price for the invoice with no risk during the transport.

Customs clearance: CIF vs CIF Incoterms

When using CIP and CIF Incoterms, the buyer and seller have similar responsibilities when it comes to customs:

  • The seller is obligated to clear goods for export, paying any taxes and fees for customs clearance and providing needed documentation.
  • The buyer is obligated to clear goods for import in the country of destination, paying customs taxes and providing needed documentation.

Learn more about customs procedures

Differences between CIF and CIP Incoterms 2020

Type of transportAll modes Non-container goods, sea freight
Export duties SellerSeller
Loading the goods SellerSeller
Freight charges SellerSeller
Insurance Seller – mandatory Seller – mandatory
Unloading BuyerBuyer
Import charges BuyerBuyer
Domestic transport BuyerBuyer
Risk transfer Named delivery location Port terminal

Want more information about Incoterms?

As you can see, CIP and CIF Incoterms have some differences except for the mode of transport. To find the best Incoterm for your specific case, we recommend reading complete guides with detailed explanations:

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FAQ – Differences between CIF and CIP Incoterms 2020

Is CIF more expensive than CIP?
It depends on the types of goods you want to import or export. Both Incoterms have similar features, but CIF is mostly used for non-containerised cargo, usually for cheaper goods sent in smaller vessels. This can mean that CIF terms can be more affordable than CIP, but only sometimes.
What is better, CIP or CIF?
As with all other Incoterms, it will depend on the volume and type of goods, the experience and bargaining power of the seller and buyer, and the freight charges either party can negotiate. You can check our complete guides to better understand the differences between CIF and CIP Incoterms 2020 and decide which term would be better for your case.
Which Incoterm is better for containerised cargo: CIF or CIP?
CIF is usually not recommended for containerised cargo since the goods may wait in containers not insured for quite some time before loading them onto the ship. On the other hand, CIP is more appropriate for containerised shipping.