In the fast-paced world of international trade, knowing your Incoterms is critical. One of the most commonly used—and sometimes misunderstood—terms is Carriage and Insurance Paid To (CIP). For Australian businesses trading across borders in 2025, understanding CIP can mean the difference between a smooth shipment and costly confusion.
What Does CIP Mean in 2025?
CIP, or Carriage and Insurance Paid To, is an Incoterm published by the International Chamber of Commerce (ICC). Under CIP, the seller delivers goods to a carrier or another nominated person at an agreed location. The seller also pays for transport and minimum insurance coverage until the goods reach the named destination. However, risk transfers to the buyer as soon as the goods are handed over to the first carrier.
Key points for 2025 Australian trade:
- Seller covers main carriage and insurance: The seller pays freight and insurance (at least 110% of the contract value, as per ICC 2020 rules) to the named place of destination.
- Buyer bears risk after handover: The moment the goods are handed to the first carrier, risk passes to the buyer—even though the seller pays for insurance and freight.
- Works for any transport mode: Unlike CIF (Cost, Insurance & Freight), CIP can be used for air, road, rail, or multimodal shipments, not just sea freight.
Recent ICC guidance (as of 2020, still current in 2025) made it explicit that the seller must obtain insurance with coverage equivalent to Institute Cargo Clauses (A) or similar, offering broader protection for the buyer.
How CIP Works: A Real-World Example
Let’s say an Australian solar panel distributor in Melbourne is selling to a commercial installer in Singapore. The contract states: CIP Singapore Changi Airport, Incoterms 2020.
- The seller arranges and pays for transport from their Melbourne warehouse to Changi Airport, plus insurance for at least 110% of the invoice value.
- At the Melbourne freight terminal, the goods are handed over to the air cargo carrier. At this moment, risk transfers to the Singapore buyer.
- If the goods are damaged en route, the buyer makes a claim against the seller’s insurance policy.
- The buyer pays for import duties and takes over responsibility for the goods on arrival in Singapore.
This separation of cost and risk is what makes CIP so popular—and why it can catch out the unwary. Buyers should always check that the seller’s insurance policy meets their needs, especially if the goods are high-value or fragile.
CIP vs. CIF and Other Incoterms: What’s Best for Your Business?
Choosing the right Incoterm can affect everything from your cash flow to your exposure to risk. Here’s how CIP compares to other popular terms in 2025:
- CIP vs. CIF: CIF is only for sea and inland waterway transport, while CIP is multimodal. CIP also requires more comprehensive insurance.
- CIP vs. DAP (Delivered at Place): Under DAP, the seller pays all costs and bears all risks until goods are delivered at the destination. With CIP, the buyer assumes risk once goods are handed to the carrier.
- CIP vs. FOB (Free on Board): FOB is used for sea freight and puts more responsibility on the buyer, including arranging insurance and main carriage.
In 2025, with more businesses relying on multimodal logistics and looking to streamline risk management, CIP remains a flexible and widely used choice for Australian exporters—especially when selling to unfamiliar buyers or in volatile markets.
2025 Policy Trends Impacting CIP Contracts
Several trends and regulatory updates are shaping the way Australian firms use CIP:
- Stricter insurance requirements: Australian exporters are increasingly opting for all-risk coverage (not just the minimum), especially for high-value goods, due to new trade finance requirements and insurer expectations.
- Digital trade documentation: The Australian Border Force and Department of Foreign Affairs and Trade are pushing for digital bills of lading and e-certificates, making it easier to prove delivery to the carrier under CIP.
- Carbon reporting: From 2025, some large importers/exporters must disclose carbon emissions for international shipments, impacting contract terms and logistics planning.
As international trade evolves, so do the risks and opportunities. Understanding how CIP works—and the latest policy changes—can help your business trade smarter and protect its interests across borders.
