When importing from China, your shipping method often determines whether CIP or CIF makes more sense. Both terms require the seller to cover freight and insurance, but they differ in transport options, risk transfer, and insurance coverage.
CIP vs CIF: Key Differences
CIP (Carriage and Insurance Paid To) and CIF (Cost, Insurance and Freight) are two rules under Incoterms® 2020.
Under both terms, your supplier arranges and pays for carriage and cargo insurance to the agreed destination. You normally handle import clearance and pay the applicable import duties and taxes.
The main differences are:
| CIP | CIF | |
|---|---|---|
| Transport mode | Any mode, including air and multimodal transport | Sea and inland waterway only |
| Delivery and risk transfer | When the seller hands the goods to the carrier at the agreed delivery point | When the goods are on board the vessel at the origin port |
| Seller pays carriage to | Named place of destination | Named destination port |
| Required insurance | Institute Cargo Clauses (A) or equivalent | Institute Cargo Clauses (C) or equivalent |
| Typical application | Containerized, air, and multimodal shipments | Conventional port-to-port sea shipments |
These two rules require the seller to cover the main transport costs. However, paying for freight does not transfer cargo risk until arrival.
For a detailed explanation of each term, see our guides to CIP Shipping Terms and CIF Shipping.
When Does Risk Transfer Under CIP and CIF?
The point of risk transfer is one of the most important differences between these terms.
With CIP, risk generally passes to the buyer when the seller hands the goods to the first carrier at the agreed delivery point. This can happen at a factory, warehouse, or freight terminal, depending on the arrangement.
Under CIF, risk transfers when the goods are loaded on board the vessel at the port of shipment.
Consider a container shipment from China.
Your supplier delivers the container to a terminal before the vessel arrives. Under CIP, the carrier handover may mark the point of risk transfer. CIF, however, uses loading on board the vessel as its delivery point.
This is why CIP often fits container shipping more closely.
In either case, the supplier still pays the agreed carriage costs to the named destination after risk has passed to you.
Before signing the purchase contract, identify both the delivery point and the destination. They serve different purposes.
CIP vs CIF Insurance: What Does Your Supplier Cover?
Both terms require the seller to obtain cargo insurance for the buyer’s benefit. Nevertheless, Incoterms® 2020 sets different minimum coverage requirements.
CIP requires broader coverage. The seller must generally arrange insurance equivalent to Institute Cargo Clauses (A), which covers a wide range of accidental losses, subject to policy exclusions.
CIF requires more limited coverage. The seller normally needs insurance equivalent to Institute Cargo Clauses (C), which covers specified risks rather than providing the broader protection of Clause A.
Both rules generally require insurance for at least 110% of the contract price, unless the parties agree otherwise.
For an importer buying machinery, electronics, or other valuable products from China, the difference can be significant. A policy that meets CIF’s minimum requirement may not cover every type of damage you expect.
Before accepting either term, check:
- The insurance clauses and exclusions
- The insured amount and currency
- Where the coverage starts and ends
- How to file a claim if the cargo arrives damaged
Even Clause A insurance has exclusions. Neither term guarantees compensation for every loss.
You can also negotiate different insurance terms with your supplier if the standard coverage does not meet your needs.
Does CIP or CIF Cost More?
CIP generally requires broader insurance coverage than CIF, which may increase the premium. Still, the total cost depends on where the supplier agrees to deliver your goods.
For example, a supplier might quote CIF Hamburg Port and CIP Hamburg Warehouse. The CIP price includes transport to the warehouse, while the CIF price covers freight to the port. You cannot compare these quotes on price alone.
When reviewing your supplier’s offer, check:
- Freight and insurance costs
- Terminal handling and unloading fees
- Customs clearance, duties, and taxes
- Inland transport to your final destination
Compare what you would pay to receive the goods at the same location under each option.
Which Term Should You Use for Shipments from China?
Your shipping method and the point where your supplier hands over the cargo will help determine which term fits best.
Container Shipping
For FCL and LCL shipments, Chinese suppliers often hand over cargo to a carrier or terminal before the vessel loads it. CIP generally fits this arrangement better than CIF, which requires delivery on board the vessel.
However, the actual handover arrangement still matters.
Air Freight
CIP works for air freight; CIF does not. If your supplier pays for air transport and cargo insurance, CIP may be a suitable choice.
Conventional Sea Freight
CIF suits conventional sea shipments, including certain bulk cargo trades, where the seller delivers goods on board the vessel and pays freight to the destination port.
Whichever term you choose, specify the delivery point and named destination in your sales contract.
Compare Shipping Costs Before You Decide
Your supplier’s CIP or CIF quote may not cover every expense. An independent freight quote can help you compare shipping costs and understand what you will pay. Airsupply offers air and sea freight services from China to destinations worldwide with a transparent pricing structure.
