Difference Between CPT and CIP (With Table)

Shipping terms or incoterms are usually three letters universally accepted and identified terminologies. Globally it has been decided that the cost of shipping is to be paid by the person who ships it or by the one who receives it. These shipping terms help in governing and making sure it is done securely and properly.

CPT vs CIP

The difference between CPT and CIP is that CPT does not include insurance, whereas CPT includes insurance. Other than this major difference, they almost have the same significance and are similar in the fact that the risks and responsibilities are owned by the seller.CPT is applicable for any and every mode of transport, whereas CIP is restricted to inland and marine modes of transport.

Carriage paid to is abbreviated as CPT, and the shipping term signifies that the seller is responsible for transporting the freight to a mutually agreed destination without having to pay the insurance for the goods. At the time when the consumer receives the goods from the seller, the ownership of the goods, the risks, and responsibilities are transformed to the buyer.

Carriage and insurance paid to are abbreviated as CIP. Just like in CPT, here, too, the risks and responsibilities are taken over by the seller. In addition to this, the seller is also supposed to pay the insurance until the freight reaches the hands of the buyer. The shipping term is limited in inland and marine modes of transportations.

Comparison Table Between CPT and CIP

Parameters of ComparisonCPTCIP
DefinitionIt means carriage paid to, where the seller takes charge of the goods until it reaches the seller’s hands. Carriage insurance paid to is the term that signifies the goods are taken care of and insured by the seller.
InsuranceThe seller does not pay insurance for the goods.  The seller ensures the goods for safety purposes.
The risk involvedSince there is no insurance, there are no risks involved.          Due to the insurance, there is much less risk involved.
Payment responsibility The seller is entirely responsible for the transportation charges.  The seller pays a part of the insurance, and the rest is settled by the receiver.
Mode of transportThis incoterm applies to all modes of transport.    This incoterm is applicable specifically for inland and sea modes of transports.

What is CPT?

In CPT, the risk is less for the buyer than for the seller as the seller takes charge of the majority of the responsibilities. Though the seller has to take the major responsibility, it still is beneficial for the seller as it urges the buyers and motivates them to confidently take up the service as they do not have to do much and everything is done by the seller, and the buyer is also not put through any risk.

The seller can make a bid deal with the policy as many buyers are ready and feel safe to let the seller take up the responsibility. This can be a huge benefit for the buyer and encourages them to go for it without any hesitation. Transit clearance is the buyer’s responsibility. Whatever may be the mode of transport of the price, it is under the wing of the seller until it reached the first destination.

In some cases, it is also inclusive of the terminal handling charges. It is conveniently used as a shipping term when put next to a destination. It simply means or implies that freight is to be delivered to that place where the seller assumes responsibility until it reaches the first destination that has been mutually agreed upon by both the seller and the buyer.

What is CIP?

In CIP, the seller pays the insurance in addition to owning the risks involved in shipping. In this mode, the seller obliges to more responsibilities than the buyer. The responsibility of the invoice, the transport of the freight, and all the official procedures and documentation are taken care of by the seller. Packaging and exportation are also undertaken by them.

The seller is given a huge responsibility of paying the custom responsibilities, loading fee, delivery cost, the expense of pre-shipment inspections in addition to the insurance for the goods. The proof of delivering the goods and licenses are also the tasks of the seller.

Though the seller carries the maximum obligations, the buyer has to do their part to make sure they receive the freight safe and intact. The duties and the facilities for importing the goods are arranged by the buyers. A part of the pre-shipment inspection and import clearance is done by the receiver of the goods.

They are also supposed to pay for their goods that have been mutually decided and agreed upon by both the parties in the contract. The goods are usually transported and delivered through inland means and water mode of transport while implying the CIP incoterm.

Main Differences Between CPT and CIP

  1. CPT is carriage paid to, whereas CIP is carriage insurance paid to.
  2. In CPT, the seller does not insure the freight, but in CIP, goods are insured.
  3. Due to the fact that the goods are not insured in CPT, damage may result in a loss. In CIP, the goods are insured, and hence damage may not result in a loss.
  4. In CPT, the major risk is taken by the seller, whereas in CIP, the buyer shares some responsibility.
  5. CPT is implied in any mode of transport, whereas CIP is usually only applied in inland and sea transportation.

Conclusion

Shipping of goods should be undertaken with care, and it is responsible for both the seller and buyer to make everything possible to make sure the transportation of the goods is seamless. Based on the mode of transport and the requirements for the goods, the appropriate policy should be used.

Incoterms come in handy and are significant as they are the same and carry the same definition throughout. They play a major role in ensuring your goods are undamaged and securing the goods throughout the journey. Totally there are about eleven distinct shipping terms that are used globally, and they are very helpful to make the entire process easier.

References

  1. https://biblio.ugent.be/publication/1212622/file/1212631
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