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Incoterms® 2020 · April 2026 · 8 min read
CPT vs CIP: The Incoterms Pair That Confuses Even Experienced Exporters
Of all the Incoterms® 2020 rules, CPT (Carriage Paid To) and CIP (Carriage and Insurance Paid To) are the pair most likely to be misunderstood — not because they are complicated, but because they look almost identical on the surface while concealing a distinction that matters enormously when a shipment is damaged in transit.
Both terms require the seller to arrange and pay for carriage to a named destination. Both transfer risk to the buyer at the same point — when the goods are handed to the first carrier at origin. Both work for any mode of transport. And yet the difference between them can mean the difference between a buyer who files a successful insurance claim and one who discovers their goods travelled entirely uninsured.
This article explains what CPT and CIP actually require, where the two terms diverge, and how to decide which is the right choice for your shipment.
What CPT and CIP have in common
CPT and CIP both belong to the “C terms” group of Incoterms® 2020 — rules under which the seller arranges and pays for the main carriage but does not bear the risk of the goods for the entire journey. This cost/risk split is the defining feature of all C terms and the source of most confusion around them.
Under both CPT and CIP, the seller is responsible for:
- Packing and preparing the goods for export
- Completing export customs clearance and paying any export duties or fees
- Delivering goods to the first carrier at the agreed place of shipment
- Arranging and paying for carriage all the way to the named place of destination
- Providing the buyer with the transport document needed to take delivery at destination
Under both CPT and CIP, the buyer is responsible for:
- Bearing all risk of loss or damage to the goods from the moment they are handed to the first carrier at origin
- Import customs clearance and payment of all import duties, VAT, and taxes at destination
- Any costs arising at destination beyond the named place — terminal handling, inland delivery, unloading
The named place under both terms is the destination — not the point of carrier handover. This is the single most misunderstood aspect of both CPT and CIP: the seller names a distant destination and pays freight to get the goods there, but risk leaves the seller’s hands at origin, the moment the goods are given to the first carrier.
The cost/risk split: why it catches people out
The separation between cost and risk under CPT and CIP is counterintuitive. In most Incoterms, cost and risk travel together — the party bearing the cost of freight also bears the risk during that freight leg. Under CPT and CIP, the seller pays for freight to the destination but carries no risk once the goods leave their hands. The buyer carries the risk for the entire main carriage leg, even though they have not paid for it.
A seller quotes CPT Rotterdam. The goods leave their factory in Vietnam, are handed to a freight forwarder in Ho Chi Minh City, and are then damaged in a warehouse fire at the Singapore transhipment port. The seller pays the freight bill all the way to Rotterdam — but the risk of that fire was with the buyer from the moment the goods were handed to the Vietnamese freight forwarder. The buyer bears the loss.
This is not a trap or a flaw in the rules. It is a deliberate structure that allows sellers to offer competitive landed prices by controlling freight costs while shifting transit risk to the buyer early. But both parties must understand it going into the contract — and the buyer must have appropriate cargo insurance in place from the point of carrier handover, not from the point of arrival.
The one difference: insurance
CPT carries no obligation on either party to arrange cargo insurance. The buyer bears the transit risk from carrier handover but is free to insure or not insure that risk as they choose.
CIP requires the seller to arrange cargo insurance and pay the premium. Under Incoterms® 2020, that insurance must be at the Institute Cargo Clauses (A) level — all-risks cover — for at least 110% of the contract value. The policy is taken out for the benefit of the buyer, meaning the buyer is the party who can make a claim if the goods are lost or damaged.
This is the only difference between CPT and CIP. Everything else — the seller’s freight obligation, the risk transfer point, the import clearance responsibility, the named destination — is identical.
| Obligation | CPT | CIP |
|---|---|---|
| Seller handles export clearance | Yes | Yes |
| Seller arranges and pays for carriage to named destination | Yes | Yes |
| Risk transfers to buyer | At first carrier handover at origin | At first carrier handover at origin |
| Seller arranges cargo insurance | No obligation | Yes — Clauses (A) minimum |
| Minimum insurance level | None required | Institute Cargo Clauses (A) — all risks |
| Insurance value | None required | Minimum 110% of contract value |
| Buyer handles import clearance and duties | Yes | Yes |
| Works for all transport modes | Yes | Yes |
The CIP insurance upgrade in Incoterms® 2020
One of the most significant changes in the 2020 revision of the Incoterms rules was the upgrade of the minimum insurance standard under CIP from Institute Cargo Clauses (C) to Institute Cargo Clauses (A).
Under Incoterms® 2010, CIP only required the seller to arrange Clauses (C) cover — the same limited named-perils policy that CIF still requires. Clauses (C) covers only a narrow list of major catastrophic events: fire, explosion, vessel stranding, sinking, collision. It does not cover theft, water damage, rough handling, or the majority of losses that actually occur to goods in transit.
Under Incoterms® 2020, CIP requires Clauses (A) — all-risks cover, subject to standard exclusions. This is a substantially broader policy that covers physical loss or damage from any external cause unless specifically excluded. For buyers receiving goods under CIP, this is a meaningful improvement. For sellers using CIP, it means the cost of arranging insurance is higher than under the 2010 rules, which should be factored into pricing.
CIF — the sea-freight equivalent of CIP — was not upgraded in 2020 and still requires only Clauses (C). This deliberate distinction between CIF and CIP reinforces the ICC’s position that CIP is the appropriate term for multimodal and container shipments, where Clauses (A) cover is more proportionate to the risks of a complex, multi-leg journey.
When to use CPT and when to use CIP
The choice between CPT and CIP comes down to three questions:
Who is better placed to arrange cargo insurance?
Under CIP, the seller arranges insurance. Under CPT, the buyer does. In some cases, the buyer has a superior position: they may have an existing open cargo policy that covers all their imports at a negotiated premium, giving them better rates and terms than the seller’s one-off policy. In that situation, CPT — with the buyer arranging their own insurance — may produce better overall cover at a lower combined cost than CIP.
In other cases, particularly where the buyer is less experienced with cargo insurance or is purchasing from a seller in a market where good local insurance is readily available, CIP is the cleaner choice. The seller takes care of the policy, the buyer is named as beneficiary, and there is no risk of the buyer failing to arrange cover before the goods are in transit.
What is the cargo type and risk profile?
Clauses (A) all-risks cover under CIP is appropriate for most general cargo — manufactured goods, electronics, textiles, food, and anything with meaningful susceptibility to handling damage or environmental exposure. For bulk commodities moving on simple routes — raw materials, agricultural produce, standardised goods in robust packaging — the seller and buyer may agree to reduce the CIP insurance requirement below Clauses (A) by explicit contract modification. Incoterms® 2020 permits this, but the modification must be agreed in writing before shipment.
For CPT shipments, buyers should ensure their cargo insurance covers the goods from the point of first carrier handover at origin — not from the destination port or the point of arrival. A buyer who assumes their existing warehouse insurance covers goods in transit is likely to discover otherwise when a claim arises mid-voyage.
Does the transaction involve a letter of credit?
Both CPT and CIP work well in letter of credit transactions because the seller controls the freight arrangement and can produce the transport documents — the bill of lading or airway bill — needed to satisfy the bank’s documentary requirements. For CIP shipments, the seller also provides the insurance certificate, which some letters of credit require. If the LC specifically calls for an insurance certificate and the transaction is on CPT terms, the seller cannot provide one — the buyer would need to arrange and present their own insurance document, which complicates the documentary credit process.
CPT and CIP versus DAP: understanding the key distinction
A common point of confusion is the difference between CPT/CIP and DAP. Under all three terms, the seller arranges and pays for carriage to a named destination. The critical difference is risk transfer.
Under DAP, risk stays with the seller for the entire journey until the goods arrive at the named destination. The seller pays for freight and bears the risk. Under CPT and CIP, risk transfers at the first carrier handover at origin. The seller pays for freight but the buyer bears the risk from that early point.
This means DAP is a more buyer-friendly commitment for high-value or fragile goods — the seller has a financial interest in the goods arriving safely because they bear the risk. Under CPT, the seller has no such interest once the goods are handed to the carrier. Buyers purchasing high-value goods from new or untested suppliers may prefer to insist on DAP rather than CPT for exactly this reason.
Naming the place correctly under CPT and CIP
Both CPT and CIP require a named place of destination — the location to which the seller has contracted and paid for carriage. This is not the risk transfer point (which is at origin, at the first carrier handover) but it is the cost endpoint.
The named place should be as specific as the shipment requires. For most container and air freight shipments, naming the destination port or airport is sufficient. For shipments where inland delivery matters — where the seller has agreed to pay freight all the way to the buyer’s warehouse — the named place should be the full address.
Examples of correct usage:
CPT Port of Felixstowe, UK, Incoterms® 2020CIP Buyer's warehouse, 22 Logistics Park, Frankfurt 60439, Germany, Incoterms® 2020CPT Chicago O'Hare International Airport, USA, Incoterms® 2020
Always include “Incoterms® 2020” in full. The version reference confirms which rulebook governs the transaction and removes any ambiguity about the insurance requirement — the Clauses (A) obligation under CIP is specific to the 2020 edition and did not apply under earlier versions.
Frequently asked questions
What is the only difference between CPT and CIP?
Insurance. Under CIP, the seller is required to arrange cargo insurance at the Institute Cargo Clauses (A) all-risks level, at a minimum value of 110% of the contract price, for the benefit of the buyer. Under CPT, there is no obligation on either party to arrange insurance. Everything else — the seller’s freight obligation, the risk transfer point, the named destination, the import clearance responsibility — is identical between the two terms.
When does risk transfer under CPT and CIP?
Risk transfers from seller to buyer when the goods are handed to the first carrier at the agreed place of shipment at origin — not when they arrive at the named destination. The seller continues to pay for freight after risk has transferred to the buyer. This cost/risk split is the defining — and most misunderstood — feature of CPT and CIP.
Can the CIP insurance requirement be reduced below Clauses (A)?
Yes, but only by explicit written agreement between buyer and seller. Incoterms® 2020 permits the parties to agree a lower level of cover than the Clauses (A) default under CIP. This modification must be documented in the sales contract before the shipment departs. If the contract is silent on insurance level, the Clauses (A) minimum applies.
Is CPT or CIP better for letter of credit transactions?
CIP is generally more straightforward for letter of credit transactions because the seller can provide both the transport document and the insurance certificate — two documents commonly required by banks under documentary credits. Under CPT, the buyer arranges their own insurance and must present their own insurance document to the bank, which adds complexity to the documentary credit process. If the letter of credit specifically requires an insurance certificate, CPT is likely to create difficulties unless the buyer’s insurance documentation is explicitly built into the LC terms.
What is the difference between CIP and CIF?
Both require the seller to arrange and pay for freight and insurance. The key differences are the mode of transport and the insurance standard. CIF applies only to sea and inland waterway transport; CIP works for any mode of transport including multimodal. CIF still requires only Institute Cargo Clauses (C) — minimum named-perils cover — as its insurance standard. CIP was upgraded in Incoterms® 2020 to require Institute Cargo Clauses (A) all-risks cover. For containerised freight, CIP is the appropriate choice; CIF is designed for bulk cargo loaded directly onto vessels.
Who pays import duties under CPT and CIP?
The buyer. Under both CPT and CIP, the seller’s obligations end with export clearance, freight, and — under CIP — insurance. Import customs clearance, import duties, VAT, and all destination country taxes are the buyer’s responsibility in both cases. Neither CPT nor CIP involves the seller in the import process at the destination.
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