This is another tricky part in the process. Since CIP includes all modes of transportation, it could be an airport terminal, a railway terminal, a container depot yard, or a warehouse of the transporter’s choice. To I'm Kelvin, However, this disregards the buyer’s local knowledge that he could have otherwise used with CIF. Essentially, the seller is responsible for the sold goods until loaded onto the ship. Just double check with them before finalizing your purchase to make sure that they will cover your freight’s: Various things like duties and taxes especially can affect insurance rates as well. Substantive changes to Incoterms 2020. The transfer of risk does not mean the same thing as the transfer of transport responsibility. is the easy part; CIF 2020 is classified for sea transportation only. CIF Cost, Insurance & Freight Incoterms 2020 is one of the most used Incoterms in the world. It addresses the conflicts with CIF and makes a few changes.Â. Are they strong and reliable? The level of cover mandated by the CIP and CIF rules is minimal, and may not satisfy the buyer’s requirements. Remember what specifics customs is looking for: Often the rules and regulations about these qualities can vary from country to country, sometimes quite significantly. link to Letter of Credit Process and Procedure, link to What Is Drayage? Once the cargo is staged at the port’s container yard, effectively the responsibility of transporting the cargo from the destination’s port yard to the final destination lies on the buyer. I Am the Seller. Before we go into those, keep in mind the following freight shipping steps, in terms of payment and insurance responsibility, are exactly the same in both CIF and CIP. Unloading and loading at the import country’s dock can sometimes still be partially paid (and therefore partially controlled) by the buyer, even under CIP. The costs now appear centralized in A9/B9 of each Incoterms® rule. We covered the benefits of marine cargo insurance at length in this post, have a look at it if you need a clearer picture. You might realize we specifically avoid using the term “Transfer of ownership” to describe the transfer of risk too. Ideally, the transfer of transport responsibility, transfer of risk and transfer of ownership happens at the exact same point to avoid any ambiguity. Carriage to port of export is always paid for, and insurance is always arranged by, the seller for both CIF and CIP. Therein lies a major advantage of CIF. With CIF 2020, the seller takes the responsibility for transporting the cargo from the seller’s factory to the seaport of discharge. Among them: More simple language, with less legal content; More detailed explanatory content. I hope that you enjoy reading them as much as I do posting them. eval(ez_write_tag([[336,280],'maxfreights_com-banner-1','ezslot_4',152,'0','0'])); Transfer of ownership is where the possession of goods is transferred from one party to another, usually a documentary transfer with a Bill of Lading Form. Incoterms 2020 CIF in transport. While this creates more work for the seller, they can make sure that their insurance is going towards covering a worthwhile method. Either way, the seller is responsible. In summary: According to Incoterms 2000, CIF stands for Cost, Insurance and Freight (… named port of destination), which means that the seller delivers the goods to the port of shipment. That will greatly simplify your paperwork and payment schedule. Sometimes, if you want something done right, you have to do it yourself.Â. They still cover the insurance while the ship sails but are virtually uninvolved once it arrives. For example, in a Free on Board or (FOB) shipment, the seller is responsible for transferring the cargo to the port, clearing customs for export and stage the container onto the booked vessel. The main difference between CIF and CIP is where the insurance and logistical responsibility for freight shifts. Which Freight Insurance Should I Buy for My CIF or CIP Transaction? They tend to only scan or open suspicious packages though, so the shipper is always required to declare what they have. If there is cargo damage on board of the vessel, and the damage is proved to be damaged by the carrier, the buyer cannot argue that he/she hasn’t had ownership of the goods yet if the Bill of Lading hasn’t reached him. I'm Kelvin, I work as a custom broker and I'm thrilled with having the experience to share my industry knowledge with you. This is important as the risk of ownership of the goods transported is different between CIF and CIP, which we will explore further below. Since the buyer pays for the carrier from the destination port, they also make sure that the carrier has the equipment to unload the products, if the buyer does not have any. this scenario, the shipment term is FOB, the buyer arranges the freight In CIP, unloading in port of import is the responsibility of the seller, not the buyer like it is in CIF. Differences between Incoterms 2010 and Incoterms 2020 a. . I work as a custom broker and I'm thrilled with having the experience to share my industry knowledge with you. Well, the seller does, since he is responsible. It is Clauses “C” of Institute Cargo Clauses – excludes many risks which many buyers want covered. By doing this, the seller is effectively in control of the entire freight shipping process from the moment it leaves his facility all the way to the buyer’s doorstep. Once the container is “shipped on board”, detailed in the Bill of Lading, the seller then arranges the Original Bill of Lading to be couriered to the buyer once he receives the payment. 2. If you are a buyer, it is a good idea to make sure that what you are purchasing can actually make it through customs before completing the transaction. They still cover the insurance while the ship sails but are virtually uninvolved once it arrives in the destination country’s port. Customodal's holistic approach to logistics helps power manufacturing growth across the midwestern U.S replaces Customodal provides top-tier logistics, freight, virtual fleet, safety/compliance and consulting services. Incoterms 2020 are effective from 1 st January 2020. Below are three freight insurance carriers available: To read more about Mike, check out his full bio here. The seller stays responsible for the insurance for all of the transportation process up until the freight is unloaded at the destination/buyer’s location. The new organisation of the individual articles of the rules will better reflect the logic of a business transaction. Additionally, the ICC has announced they will issue a new set of Incoterms in 2020, so you’ll want to keep your eyes out for this revision. Rather, these goods are simply put on the ship and that is it. Loading at origin refers to the very initial part of a shipping process, when the goods are first loaded onto a vehicle for transport to the shipping dock. But if you have to pay insurance for something, don’t you want to make sure it is done correctly? They could either do this with a private carrier, or by themselves. Yes. This step specifically describes when the truck is unloaded, after arriving on its journey from the seller, but before the contents are actually loaded on the vessel or airplane. eval(ez_write_tag([[580,400],'maxfreights_com-leader-1','ezslot_2',170,'0','0'])); At No stone is left unturned. Further breakdown in cost allocation. Fill in the form below and we will get back to you ASAP. Mike is Founder and CEO of Customodal. The objective of the revision of INCOTERMS ® was to improve the presentation of rules to make the selection of the most suitable rule for the relevant purchase agreement as simple as possible. This is great for CIF, when this carrier method is more common. They also offer Pen Cargo Insurance, which covers freight not stored in containers. The seller is no longer insuring a process of which he has no idea how it works. Nevertheless, in CIF, the seller is fully responsible for the cost and insurance associated with everything. On the other hand, the Transfer of transport responsibility is where the responsibility of moving the cargo has been transferred from one party to another. There are actually plenty of freight insurance companies available out there that are CIF and CIP compliant. Of course, this gets expensive, but if you are paying the insurance, CIP gives you much more control to make sure you will not actually have to use that insurance. picked up the cargo. This step specifically describes when the truck is unloaded, after arriving on its journey from the seller, but before the contents are actually loaded on the vessel or airplane. This can be done: It really all depends how big and heavy the goods are. While this step is one of the most likely scenarios where (from contents shifting in the truck during the journey) your freight can get damaged, the seller is still fully responsible for paying during CIF. – They are part of UPS’s massive shipping company umbrella. CIF has been around for well over a hundred years. This is done by: Unload methods vary largely on the economic infrastructure of the country. Last but not least, the freight finally makes it through all these steps and arrives at the customer’s destination, or the delivery location. He can only lay the damage claim to the ocean carrier he was responsible to arrange. Difference Between 2010 and 2020 Incoterms As mentioned earlier, Incoterms are continuously updated, every 10 years to be exact. Once the cargo is staged at the port’s container yard, effectively the responsibility of transporting the cargo from the destination’s port yard to the final destination lies on the buyer. Differences between CIF and CIP: Mode of Transport. This was generally decided already during the loading at origin step. Drayage Explained, the International Chambers of Commerce (ICC), Coverage up to the agreed destination at the. In Incoterms® 2010 the only difference between DAP and DAT was that in DAT the goods were delivered unloaded, whereas in DAP, the seller delivered the goods when the goods were placed at the disposal of the buyer on the arriving means of transport for unloading. The seller must pay the cost of carriage, but … The Incoterms rules provide specific guidance to individuals participating in the import and export of global trade daily. Apart from the FOB rule, the most frequently used in bulk cargo transport by sea is the CIF rule. Our company works as a freight forwarder in Thailand, CFR and CIF trading conditions are used by the customer, due to the volume of exports from Thailand. With the CIP 2020, the seller takes the responsibility for transporting the cargo to a named destination of the buyer’s choice. Once the freight reaches the port of the buyer’s country, it must be unloaded off the ship. CIP – Carriage and Insurance paid to (Place of Destination) - Incoterms 2020 Explained. You can designate your own carrier who you trust to make sure the freight is successfully delivered. are the aspects we will look into to decipher the difference between CIF and CIP. The ICC has made the following substantive changes to the parties' obligations in response to industry concerns: (i) Bills of Lading with an on-board notation (FCA - Free Carrier) Let’s take a closer look. Under CIF / CIP, the seller buys insurance for the buyer. In CIF has been around for well over a hundred years. Under CIP, that is completely paid for and insured by the seller, not the buyer. But do not forget, the seller is still insuring everything here. This Your email address will not be published. What is the difference between Incoterms 2010 and Incoterms 2020? The word “Dray” as a noun is a carriage that is pulled by a horse, which does not make any sense in supply chain logistics. Or, more likely, he chooses an unloading company that he knows and trusts. The Incoterms 2020 rules provide for different levels of insurance coverage in the Cost Insurance and Freight (CIF) rule and Carriage and Insurance Paid To (CIP) rule. What are the differences between Incoterms 2010 and 2020? It might do you some good to see how qualified the carrier is, even if you are the seller of the goods. In fact, the buyer is responsible for absolutely everything in EXW. Both CIF and CIP INCOTERMS requires the seller to purchase the insurance on behalf of the buyer. I hope that you enjoy reading them as much as I do posting them. It depends on the specific buyer and seller agreement. Don’t forget to check with your Freight Forwarder for this coverage.  They will frequently offer an, HAZMAT Shipping – The Basics of Shipping Hazardous Materials, An Easily Attainable Vision of a Digitized Supply Chain, Loading on truck in port of import: buyer, A receiver will be on site with that equipment (if not provided by the carrier), The receiver will know where to drop the freight, The receiver will be able to sign for the freight, Loading on Truck in Port of Import: seller. I have kept the same numbers used earlier for your convenience: The steps in between are the ones that are really different. CIP is a relatively new Incoterm better designed than CIF to handle the realities of 21 st century container shipping. this specific point, before the Original Bill of Lading reaches the hand of the For CIP, it transitions more gradually to when delivery at buyer destination occurs. key distinction between CIF and CIP is that although in a CIP term the seller arranges Before that, we have to point out that the best description of all 12 INCOTERMs can only be accurately described by the people responsible in drafting the Rules, the International Chambers of Commerce (ICC) came up with the INCOTERM in order to eliminate any ambiguity in trading between the buyer and the seller.eval(ez_write_tag([[336,280],'maxfreights_com-box-3','ezslot_3',148,'0','0'])); Here One point specific to CIF is that it’s the seller’s responsibility to load the vessel at the port.⁶ That relates to the fact that CIF is not intended for use with containerized freight, whereas CIP is. This step in the transportation process is when the freight itself is loaded onto the actual vessel (or airplane) that will be moving it between the two countries in question. Difference between CIP, CIF, CFR, and FOB FAQs on CIF Incoterms CIF stands for Cost, Insurance and Freight, wherein the expenses are borne by the seller, from delivering goods and carrying settlement charges for carriage and insurance till the designated port. A lot of these terms deal with similar topics but are not exactly the same thing, like Carriage and Insurance Paid (CIP) and Cost Insurance and Freight (CIF). The CIP … More info about inbound freight and ROI In Incoterms® 2010, insurance is required under clause C, but in Incoterms® 2020, CIP requires insurance complying with Institute Cargo Clause (A) whereas CIF requires insurance under Clause C. Naturally, all costs and insurance with this step is allocated to the seller. In CIF (and, actually, in every Incoterm method except DPU) it is the buyer’s responsibility to unload at the destination and pay for any associated costs.Â. These regulations are designed to keep buyers and sellers from across the globe on the same page when negotiating shipping contracts. buyer, the ownership of the goods is not yet transferred to the buyer, however, The seller wants cheaper insurance, which means a more expensive carrier. the Transfer of Risk is where the risk of moving cargoes is transferred from one party to another, as dictated by the INCOTERM rule arranged. What kind of trucks are they using exactly? There is only one new term and most of the changes are minor. Other than that, the two rules are similar. Under the Incoterms® rules 2020, … Some have all four. Similarly, if the delivery location is somewhere other than the buyer’s location, the buyer must make sure: CIF generally worked really well for decades. January 2020 onwards, Incoterms 2020 will apply unless the contract expressly specifies otherwise. Here is a specific breakdown of buyer and seller responsibilities in CIF throughout the shipping process: Probably the best thing about Incoterm standards is that granular level of detail to every single step in the freight transportation process. In Incoterms® 2010 the only difference between DAP and DAT was that in DAT the goods were delivered unloaded, whereas in DAP, the seller delivered the goods when the goods were placed at the disposal of the buyer on the arriving means of transport for unloading. Carriage to Port of Export describes the movement of the freight from the shipper’s location to the actual port or airport from which it will begin its journey. Save my name and email in this browser for the sold goods until loaded onto the ship the. Insurance, which covers freight not stored in containers agrees to purchase the while! 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