Choosing the right Incoterm is essential when importing goods internationally. Two similar but distinct options are CIP (Carriage and Insurance Paid To) and CPT (Carriage Paid To), both of which assign most responsibilities to the seller but differ when it comes to insurance requirements.
In this article, we compare CIP and CPT to help importers and logistics professionals understand how insurance and risk transfer operate under each Incoterm. Whether you are coordinating your own shipments or considering working with a reliable freight forwarder like Ship4wd, this comparison will support smarter shipping decisions.
Understanding Incoterms
Incoterms, maintained by the International Chamber of Commerce (ICC), help clarify trade responsibilities in international shipping. These globally recognized rules define who handles each part of the shipping process, from freight booking to insurance, and customs clearance.
There are 11 Incoterms in the 2020 edition, including:
- EXW (Ex Works)
- FCA (Free Carrier)
- FAS (Free Alongside Ship)
- FOB (Free On Board)
- CFR (Cost and Freight)
- CIF (Cost, Insurance, and Freight)
- CPT (Carriage Paid To)
- CIP (Carriage and Insurance Paid To)
- DAP (Delivered at Place)
- DPU (Delivered At Place Unloaded)
- DDP (Delivered Duty Paid)
What Is CIP (Carriage and Insurance Paid To)?
CIP (Carriage and Insurance Paid To) is an Incoterm where the seller pays for both the main transportation and cargo insurance to the named destination. However, risk transfers to the buyer once the goods are handed over to the first carrier at origin, even if the seller continues covering costs to the final point.
Insurance under CIP is mandatory and must cover at least 110% of the contract value, typically under Institute Cargo Clauses (A) or equivalent terms. The seller also handles export procedures and documentation. From the first carrier onward, the buyer assumes all risk and is responsible for import clearance, duties, and final delivery.
CIP supports all transport modes, including air, sea, rail, road, and multimodal shipping, making it highly adaptable for international trade.
Advantages of CIP:
- Seller Covers Transport and Insurance: The seller handles logistics and secures insurance, easing planning for the buyer.
- Risk Transfers Early: Once goods are handed to the first carrier, the buyer assumes risk, despite the seller’s continued cost coverage.
- Strong Cargo Protection: Mandatory insurance provides coverage for at least 110% of the cargo’s value, offering peace of mind.
- Cross-Mode Compatibility: Works across all shipping modes, including air, sea, rail, and road.
What Is CPT (Carriage Paid To)?
CPT (Carriage Paid To) describes a scenario in which the seller takes on the responsibility of arranging and paying for transportation to a designated location, such as a terminal or inland point.
However, the transfer of risk takes place much earlier, once the goods are handed over to the first carrier. The buyer is responsible for any risk, damage, or loss incurred from that point forward.
This Incoterm is applicable across all modes of transport, including multimodal shipping. The seller must manage export customs clearance and get the goods to the first carrier, while the buyer becomes responsible afterward for arranging insurance (if desired), as well as handling duties and import clearance at the destination.
Advantages of CPT:
- Main Freight Arranged by Seller: The seller arranges and covers the main transportation to the agreed location.
- Defined Risk Cutoff: With risk transferring at the point of carrier handoff, both parties have a clear understanding of their obligations.
- Simplified Origin Procedures: The seller’s responsibility for export handling simplifies challenges related to origin country regulations.
- Versatility: Works well across sea, air, rail, or mixed transport methods, offering flexibility for global shipments.
CIP vs. CPT: What’s the Difference?
While both CIP and CPT can be applied for all modes of transport and require the seller to arrange and pay for the main carriage, their core difference lies in insurance. CIP mandates the seller to provide cargo insurance, while CPT leaves that decision to the buyer.
CIP vs. CPT: Differences in Responsibilities
Understanding CIP Responsibilities
Seller Responsibilities Under CIP:
- Packaging and preparing goods for shipment
- Arranging and paying for pre-carriage and main carriage
- Providing insurance coverage of at least 110% of the contract value
- Handling export clearance procedures and documentation
Buyer Responsibilities Under CIP:
- Assuming risk once the goods are with the first carrier
- Managing import customs clearance, duties, and taxes
- Coordinating the final delivery at the destination
Understanding CPT Responsibilities
Under CPT, the seller also covers main transportation and export clearance, but does not provide insurance.
Seller Responsibilities Under CPT:
- Packaging and preparing goods for shipment
- Arranging and paying for pre-carriage and main carriage
- Handling export clearance procedures and documentation
Buyer Responsibilities Under CPT:
- Assuming risk once the goods are with the first carrier
- Paying for optional insurance (if desired)
- Managing import customs clearance, duties, and taxes
- Coordinating the final delivery at the destination
The main difference between CIP and CPT is that under CIP the seller is obliged to secure insurance for at least 110% of the contract value, typically under Institute Cargo Clauses (A) or equivalent terms.
CIP vs. CPT: Risk Transfer Comparison
Let’s take a closer look at how and when risks are transferred according to each Incoterm:
- CIP (Carriage and Insurance Paid To): Risk transfers once the goods are delivered to the first carrier, even though the seller pays for freight and provides cargo insurance.
- CPT (Carriage Paid To): Risk also transfers at the first carrier, but the seller is not required to provide insurance. However, while not mandatory, buyers can still add cargo insurance if they desire.
It’s important to note that under both Incoterms, risk transfers early in the shipping process, when the goods are delivered to the first carrier. However, CIP includes mandatory insurance, offering the buyer an added layer of protection.
CIP vs. CPT: Cost Implications
When it comes to cost allocation, CIP and CPT are largely similar. In both cases, the seller is responsible for export clearance, delivery to the first carrier, and the cost of the main carriage to the named destination. The buyer covers import clearance, duties, and final delivery.
The main distinction lies in insurance: under CIP, the seller must provide insurance coverage of at least 110% of the contract value, while under CPT, insurance is not mandatory. Buyers may choose to arrange their own coverage if needed.
CPT vs. CIP Incoterms: The Bottom Line
As previously mentioned, CPT and CIP share a similar structure in terms of responsibility and cost coverage, but differ significantly when it comes to insurance. Under CIP, the seller is required to secure insurance, while under CPT, insurance is not mandatory. Both Incoterms apply to all types of modes of transportation.
It’s also important to note that both Incoterms place the responsibility for arranging the main freight on the seller. This limits the buyer’s ability to select carriers, preferred routes, or trusted service providers. As a result, buyers must rely on the seller’s arrangements, with these logistics costs typically built into the final product price. For this reason, many importers prefer more buyer-focused Incoterms such as FCA (Free Carrier), where the buyer arranges the main carriage.
With the support of a trusted freight forwarding partner, importers can enjoy greater flexibility and freedom. It enables easier coordination of shipments from multiple suppliers across different countries and global markets, helping importers scale efficiently and source a wider range of products without being tied to a single seller’s logistics setup.
Ship4wd: Your Trusted Partner for International Shipping
Importing goods and shipping internationally does not have to be an overwhelming process. As your digital freight forwarder, we help simplify every stage of the process, so you can focus on your business while we manage the logistics.
Through our intuitive online platform, you can access competitive shipping rates for air freight and ocean shipping, including FCL (Full Container Load) and LCL (Less than Container Load).
We handle the customs clearance process and submit the required documentation on your behalf to help your cargo move through borders without delay.
To safeguard your shipment, we offer optional cargo insurance, perform pre-shipment inspections, and provide advanced tracking tools to keep you informed throughout the journey.
If you need help, our 24/7 customer support team is always available to guide you at any point along the way.
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