Hell, everyone, this is Gary, I am the international trade manager from Extripod. Welcome to “Extripod Academy”, This is “International Trade Basic Knowledge” Series, in this series, we will discuss the international trade rules, payment, transporation, organization, certification and country situation, i hope those knowledges can help your doing success in the international trade business.if you have any question realted those issue, you can leave comment or go to our website www.extripod.com to contact us. Our more connect as follow. If you like our channel, please also subscribe our channel. Thank!
Incoterms 2020 CIP
In order to import goods, one should be familiar with the Incoterms rules. Last time we discuss the CPT. In group C, the basic costs of transport and insurance are paid by the seller. today we discuss CIP that is “Carriage and Insurance Paid To” means that the seller deliver the goods to buyer import point, then transfer the risk-to the buyer
As usual, we also discuss from cost, obligation, delivery, insurance and conclusion to understand this term, OK let start learn this CIP.
Incoterms 2020 CIP – Allocation of costs
The seller takes:
1. The seller take export and transit costs (outside the importing country): customs, taxes, export and transit permits, export security clearance and the cost of obtaining all official permits;
2. The seller take the costs of control activities, such as quality control, measurement, weighing, counting, delivery of appropriately labeled packaging;
3. The seller take the costs related to the shipment and transport of goods until they are delivered to the buyer;
4. The seller take the costs of issuing and sending a commercial invoice;
5. The seller take the costs related to concluding the contract of carriage as well as packaging and labeling costs enabling the carriage of goods;
6. The seller take the cost of transport insurance and informing the buyer about the delivery and handing over of goods to the carrier;
7. The seller also need takes unloading costs at the destination, if stated in the contract of carriage.
Those are the take cost from sell, how about the buyer?
1. The buyer take the costs of import formalities: customs, taxes, import and transit permits, import security clearance and costs of obtaining all official permits;
2. The buyer take the costs of obtaining any official authorizations;
3. The buyer take the cost of obtaining documents or their equivalent electronic forms that the buyer needs when importing or transiting goods;
4. The buyer take the costs related to the good from the moment they are delivered on board the vessel;
5. The buyer take any additional costs if the buyer fails to notify the seller of the time of shipment or place of destination;
6. The buyer take the costs of pre-shipment inspection of goods, (except when such inspections are required by the authorities of the exporting country);
7. The buyer take the costs of unloading goods, unless the contract of carriage indicates otherwise.
Both one all have 7 cost need to takes. So you can see CIP cost sharing almost the same cost risk level. Let see the Obligation for both parties.
Incoterm 2020 CIP-Obligation
What are the seller’s obligations?
1.The seller carrying out all the duties under the terms of delivery specified in the contract.
2. The seller handing over the goods to the carrier on the agreed date stated in the contract.
3. The seller contracting or organizing the carriage of the goods from the agreed point of delivery to the named place of destination.
4.The seller’s operating according to all transport-related security requirements for transport to the destination.
5.The seller packaging and marking the goods.
6.The seller assisting the buyer in obtaining any documents necessary for transit and import clearance formalities.
Then we need to see What are the buyer’s obligations?
1. The buyer taking delivery of the goods.
2. The buyer carrying out and paying for import clearance.
3. The buyer obtaining documents necessary for import and transit.
4. The buyer assisting the seller, at his request, risk, and cost, in obtaining any documents necessary for the export formalities.
5. The buyer Informing the seller about the place and date of delivery.
Those are all obligation issues. Then let check the Delivery and Transport issue.
Incoterm 2020-CIP Delivery Of Goods
Delivery of goods
In the CIP Incoterms rule, delivery of the goods is the moment of handing over the goods to the carrier. If there are several carriers, the seller is liable for the goods only until they are handed over to the first carrier. The risk related to the damage or loss of the goods transfers from the seller to the buyer at the time of placing the goods, for example. on a ship or a train.
It is noteworthy that after the delivery of the goods to the carrier, the seller does not guarantee that the goods will arrive at the destination in good condition, in a specified quantity or at all. Nevertheless, the seller must conclude a contract for the carriage of goods from the place of delivery to the agreed destination.
Incoterm 2020-CIP Insurance
Insurance of goods on the terms of Incoterms 2020 CIP
In the case of CIP Incoterms, the seller contracts for insurance in compliance with LMA and IUA clauses or any similar cargo clauses appropriate to the means of transport used. LMA means Lloyd’s Market Association, and IUA means
International Underwriting Association of London , those two organizations i will discuss in our “International Organization Part”, so let back to “Incoterm Part”. The exception is the custom in the industry or agreement between the parties.
It turns out that in the case of CIP Incoterms, the seller usually provides basic insurance for the goods. When required by the buyer, the seller must be ensured that the buyer provides all necessary information required by the seller, provide additional insurance if possible, such as insurance compliant with Institute War Clauses or Institute Strikes Clauses or similar clauses. The costs of additional insurance can be imposed on both the buyer and the seller.
The insurance should cover the price of transported goods plus 10%. The insurance should be in the same currency as the prices of the goods specified in the contract.
Incoterm 2020-CIP Transport
The CIP rule can be used regardless of the chosen type of transport. This also applies to the use of more than one mode of transport.
In addition, if it is customary in the chosen mean of transport or the buyer expresses such a need, the seller must provide the buyer at his expense with the transport documents stated in the contract.
Incoterm 2020-CIP Conclusion
In the CIP rule, the goods are transferred when they are delivered to the first carrier, while in the CIF rule when the goods are loaded on a mean of transport.
Also, unlike the CFR rule, in the CIP rule, the seller is responsible for concluding the contract and paying the cost of insuring the goods to the buyer.
The CIP Incoterms rule imposes on the seller the obligation to conclude a contract of insurance covering the risk of loss or damage to the goods by the buyer from the delivery point to at least the place of destination. This can cause difficulties when the destination country requires purchasing insurance cover on the spot. In this case, the parties should consider selling and buying under the CPT Incoterms rule.
OK, until now, the CIP main content is finished. CIP and CPT can work for all kinds of transport model, we will discuss the CFR and CIF which only can work for sea and inland waterway transport. The last two rule in C Group.
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A1 GENERAL OBLIGATIONS
The seller must provide the goods and the commercial invoice in conformity with the contract of sale and any other evidence of conformity that may be required by the contract.
Any document to be provided by the seller may be in paper or electronic form as agreed or, where there is no agreement, as is customary.
B1 GENERAL OBLIGATIONS
The buyer must pay the price of the goods as provided in the contract of sale.
Any document to be provided by the buyer may be in paper or electronic form as agreed or, where there is no agreement, as is customary.
The seller must deliver the goods by handing them over to the carrier contracted in accordance with A4 or by procuring the goods so delivered. In either case the seller must deliver the goods on the agreed date or within the agreed period.
B2 TAKING DELIVERY
The buyer must take delivery of the goods when they have been delivered under A2 and receive them from the carrier at the named place of destination or if agreed, at the point within that place.
A3 TRANSFER OF RISKS
The seller bears all risks of loss of or damage to the goods until they have been delivered in accordance with A2,with the exception of loss or damage in the circumstance described in B3.
B3 TRANSFER OF RISKS
The buyer bears all risks of loss of or damage to the goods from the time they have been delivered under A2.
If the buyer fails to give notice in accordance with B10, then the buyer bears all risks of loss of or damage to the goods from the agreed date or the end of the agreed period for delivery, provided that the goods have been clearly identified as the contract goods.
The seller must contract or procure a contract for the carriage of the goods from the agreed point of delivery, if any, at the place of delivery to the named place of destination or, if agreed, any point at that place. The contract of carriage must be made on usual terms at the seller´s cost and provide for carriage by the usual route in a customary manner of the type normally used for carriage of the type of goods sold. If a specific point is not agreed or is not determined by practice, the seller may select the point of delivery and the point at the named place of destination that best suit its purpose.
The seller must comply with any transport-related security requirements for transport to the destination.
The buyer has no obligation to the seller to make a contract of carriage.
Unless otherwise agreed or customary in the particular trade,the seller must obtain, at its own cost, cargo insurance complying with the cover provided by Clauses(A)of the Institute Cargo Clauses(LMA/IUA) or any similar clauses as appropriate to the means of transport used. The insurance shall be contracted with underwriters or an insurance company of good repute and entitle the buyer, or any other person having an insurable interest in the goods, to claim directly from the insurer.
When required by the buyer, the seller must, subject to the buyer providing any necessary information requested by the seller, provide at the buyer´s cost any additional cover, if procurable, such as cover complying with the Institute War
Clauses and /or Institute Strikes Clauses (LMA/IUA) or any similar clauses (unless such cover is already included with the cargo insurance described in the preceding paragraph).
The insurance shall cover, at a minimum, the price provided in the contract plus 10%(i.e 110%)and shall be in the currency of the contract.
The insurance shall cover the goods from the point of delivery set out in A2 to at least the named place of destination.
The seller must provide the buyer with the insurance policy or certificate or any other evidence of insurance cover.
Moreover, the seller must provide the buyer, at the buyer´s request, risk and cost, with information that the buyer needs to procure any additional insurance.
The buyer has no obligation to the seller to make a contract of insurance. However, the buyer must provide the seller, upon request, with any information necessary for the seller to procure any additional insurance requested by the buyer under A5.
A6 DELIVERY/TRANSPORT DOCUMENT
If customary or at the buyer´s request, the seller must provide the buyer, at the seller´s cost, with the usual transport document[s] for the transport contracted in accordance with A4.
This transport document must cover the contract goods and be dated within the period agreed for shipment. If agreed or customary, the document must also enable the buyer to claim the goods from the carrier at the named place of destination and enable the buyer to sell the goods in transit by the transfer of the document to a subsequent buyer or by notification to the carrier.
When such a transport document is issued in negotiable form and in several originals, a full set of originals must be presented to the buyer.
B6 DELIVERY/TRANSPORT DOCUMENT
The buyer must accept the transport document provided under A6 if it is in conformity with the contract.
A7 EXPORT/IMPORT CLEARANCE
a) Export clearance
Where applicable, the seller must carry out and pay for all export clearance formalities required by the country of export, such as:
•security clearance for export;
•pre-shipment inspection; and
•any other official authorisation.
b) Assistance with import clearance
Where applicable, the seller must assist the buyer, at the buyers request, risk and cost, in obtaining any documents and/or information related to all transit/import clearance ormalities, including security requirements and pre-shipment inspection, needed by any country of transit or the country of import.
B7 EXPORT/IMPORT CLEARANCE
a) Assistance with export clearance
Where applicable, the buyer must assist the seller at the seller´s request, risk and cost in obtaining any documents and/or information related to all export clearance formalities, including security requirements and pre-shipment inspection, needed by the country of export.
b) Import clearance
Where applicable, the buyer must carry out and pay for all formalities required by any country of transit and the country of import, such as:
•import licence and any licence required for transit;
•security clearance for import and any transit;
•pre-shipment inspection; and
•any other official authorisation.
The seller must pay the costs of those checking operations (such as checking quality, measuring, weighing counting) that are necessary for the purpose of delivering the goods in accordance with A2.
The seller must, at its own cost, package the goods, unless it is usual for the particular trade to transport the type of goods sold unpackaged. The seller must package and mark the goods in the manner appropriate for their transport, unless the parties have agreed on specific packaging or marking requirements.
The buyer has no obligation to the seller.
A9 ALLOCATION OF COSTS
The seller must pay:
a) all costs relating to the goods until they have been delivered in accordance with A2, other than those payable by the buyer under B9;
b) transport and all other costs resulting from A4, including the costs of loading the goods and transport-related security costs;
c)any charges for unloading at the agreed place of destination but only if those charges were for the seller´s account under the contract of carriage;
d) the costs of transit that were for the seller´s account under the contract of carriage;
e) the costs of providing the usual proof to the buyer under A6 that the goods have been delivered;
f) the costs of insurance resulting from A5;
g) where applicable, duties, taxes and any other costs related to export clearance under A7(a); and
h) the buyer for all costs and charges related to providing assistance in obtaining documents and information in accordance with B7(a).
B9 ALLOCATION OF COSTS
The buyer must pay:
a) all costs relating to the goods from the time they have been delivered under A2, other than those payable by the seller under A9.
b) the costs of transit, unless such costs were for the seller´s account under the contract of carriage;
c) unloading costs, unless such costs were for the seller account under the contract of carriage;
d) the costs of any additional insurance procured at the buyers request under A5 and B5;
e) the seller for all costs and charges related to providing assistance in obtaining documents and information in accordance with A5 and A7(b);
f) where applicable, duties, taxes and any other costs related to transit or import clearance under B7(b); and
g) any additional costs incurred if it fails to give notice inaccordance with B10, from the agreed date or the end of the agreed period for shipment, provided that the goods have been clearly identified as the contract goods.
The seller must notify the buyer that the goods have been delivered in accordance with A2.
The seller must give the buyer any notice required to enable the buyer to receive the goods.
The buyer must, whenever it is agreed that the buyer is entitled to determine the time for dispatching the goods and/or the point of receiving the goods within the named place of destination, give the seller sufficient notice.