Lesson 4 / 11 · any mode of transport
CIP Carriage and Insurance Paid To
Like CPT — the seller pays transport to the named destination while risk passes at hand-over to the first carrier — plus the seller must buy cargo insurance for the buyer's benefit. Under the 2020 edition the default level of cover is high ('all risks' type).
Reviewed by: pending — expert review by TermVisa's editor (retired VP, international transport) in progress · Last updated
Scenario
Temperature-controlled medicines flown door-to-door from Basel to Seoul (air)
CIP Seoul (buyer's warehouse) Incoterms® 2020
- Seller
- Pharmaceutical manufacturer, Basel, Switzerland
- Buyer
- Pharmaceutical distributor, Seoul, South Korea
- Transport
- Air — door-to-door, temperature-controlled, Zurich (ZRH) → Seoul Incheon (ICN)
The seller, a pharmaceutical manufacturer in Basel, Switzerland, sells eight pallets of temperature-controlled medicines to the buyer, a distributor in Seoul, South Korea, under CIP Seoul Incoterms® 2020, naming the buyer's warehouse. Transport is by air, door-to-door: the seller's pharma forwarder collects the pallets in a refrigerated truck, flies them from Zurich (ZRH) to Incheon (ICN) and delivers them to the warehouse. The seller also buys the cargo insurance.
Illustrative scenario: companies are generic, and real contracts, carriers and countries add their own conditions.
The journey, stage by stage
Top bar: who pays for each stage. Bottom bar: who bears the risk of loss or damage. The red line marks where risk passes.
- Seller
- Buyer
- Depends on contract / carrier or port practice
- Point where risk passes
⚠ Risk passes when the pallets are handed to the forwarder's truck in Basel. The seller-bought insurance then protects the buyer for the rest of the trip.
- Loading at the seller's premises — Seller: Pallets handed to the forwarder's refrigerated truck
- Export clearance — Seller: Seller files the export declaration in Switzerland
- Pre-carriage to the departure terminal — Seller: Refrigerated truck to Zurich airport
- Departure terminal handling and loading — Seller: Screening and temperature-controlled handling at ZRH
- Main carriage — Seller: Air freight ZRH → ICN
- Arrival terminal: unloading and handling — Depends: Incheon handling: seller's if included in its door-to-door rate — check
- Import clearance, duties and taxes — Buyer: Korean import clearance, duties and taxes
- On-carriage to the named place — Seller: Refrigerated delivery to the Seoul warehouse, in the seller's contract
- Unloading at the destination — Buyer: Buyer unloads unless the carriage contract includes it
Who does what in this scenario
| Party | What they arrange / do | Who pays (them / what they pay) | Risk they carry | Key documents |
|---|---|---|---|---|
| Seller / exporter | Books one door-to-door air contract to Seoul, buys the cargo insurance, gets the export declared and sends the documents. | Export formalities, all carriage to the Seoul warehouse (as contracted) and the insurance premium. | Until the pallets are handed to the first carrier in Basel. | Commercial invoice, packing list, air waybill, insurance policy or certificate, temperature records, proof of export. |
| Buyer / importer | Clears the pallets in Korea (including any product-specific import approvals), receives and unloads them, and claims on the insurance if something goes wrong. | Duties and import taxes, unloading, charges not in the seller's freight; extra cover if it wants more than agreed. | From hand-over in Basel — covered by the seller-bought policy. | Air waybill, insurance certificate (it must be able to claim under it), import declaration. |
| Origin freight forwarder | The seller's pharma forwarder handles the refrigerated pick-up, airline booking with temperature control, and the export filing through its broker. | Seller. | As contracting carrier, liable within air-convention limits. | House air waybill, temperature log. |
| Destination freight forwarder | Its Korean partner handles arrival at Incheon, cold storage and delivery to the warehouse. | Seller (through the door-to-door rate); buyer for local extras. | Its own handling. | Delivery receipt, temperature log. |
| Air carrier (airline) | Flies the pallets ZRH → ICN in temperature-controlled conditions. | By the forwarder, out of the seller's freight. | Liable per kilogram within air-convention limits. | Master air waybill. |
| Cargo insurer | Under the 2020 edition the seller must by default buy broad 'all risks'-type cover (comparable to Institute Cargo Clauses (A)), for at least the contract value plus 10%, in the contract currency, from the risk point to the named place, with the buyer able to claim directly. The parties may agree a lower level. For medicines, check whether temperature deviation is covered — it often needs a specific extension. | Seller pays the premium. | Pays claims under the policy wording; exclusions (e.g. poor packing, delay) still apply. | Insurance policy or certificate usable by the buyer. |
| Customs broker (export) | Files the export declaration in Switzerland for the seller. Most countries require one; value thresholds, exceptions and export-control checks vary — ask the broker. | Seller. | Answers to its client for filing errors; the exporter stays responsible to customs. | Export declaration and release (proof of export). |
| Customs broker (import) | Classifies the goods, files the import declaration in South Korea for the buyer as importer, pays duties and import taxes on its account and obtains release. Medicines usually also need product approvals from the health authority. | Buyer. | The buyer remains responsible to customs as importer; the broker answers to it for its own errors. | Import declaration, duty and tax receipts, release. |
| Banks (letters of credit) | If a documentary credit is used, the bank checks that the insurance document matches it (amount, currency, risks, dates) as well as the air waybill. Insurance mismatches are a frequent reason for refused documents. | As negotiated. | Documentary risk. | Documentary credit, transport and insurance documents. |
| Terminals and ports | Airport cargo terminals at ZRH and ICN provide cold rooms; time out of temperature at a terminal is the main damage risk. | Through the seller's door-to-door rate, except delays caused by the buyer. | Their own handling. | Cold-chain records. |
✗ Common mistakes
- Copying CIF habits: buying minimum cover under CIP when the 2020 edition expects broad cover unless agreed otherwise.
- An insurance certificate the buyer cannot claim under (wrong assured name, not transferable).
- Insuring only to the arrival airport when the named place is the buyer's warehouse.
- Assuming CIP means the seller carries the risk until delivery. It does not — the insurance is what protects the buyer.
? What to ask before you sign
- Your cargo insurer (Seller) Does this certificate give 'all risks'-type cover, at least 110% of the invoice value, in the contract currency, up to the buyer's warehouse — and does it cover temperature deviation?
- Your cargo insurer (Buyer) Can I claim directly under the seller's policy, and where do I file a claim locally?
- Your freight forwarder (Seller) Are airport handling and delivery to the warehouse included in your rate? Who unloads?
- Your customs broker (Buyer) Does the destination accept insurance placed by a foreign seller, and which product approvals do we need?
Self-check: 3 quick questions
No sign-up, nothing is saved or sent. Pick an answer to see the explanation.