CIP Freight Cost: Who Pays and How It Is Calculated

A CIP freight quotation can read as a single price for a delivered shipment. It is not a delivered price. Under CIP, Carriage and Insurance Paid To, the seller contracts and pays for carriage to a named place of destination and buys cargo insurance for the buyer, but risk passed to the buyer at handover to the first carrier. The freight figure inside the price is the seller's carriage contract, priced leg by leg, and several charges after arrival sit outside it.

This guide follows only the freight cost under CIP: who pays for carriage, how it is calculated, which surcharges move it, where the insurance premium sits, and which destination charges the buyer still pays. Every figure is labeled as an example figure.

The carriage contract is the freight cost document

The freight cost under CIP is whatever the seller's contract of carriage costs, to the named place of destination. The seller chooses the carrier, books the movement and pays the carriage charges. The buyer should still ask to see how the figure was built.

Two places control the freight bill. The place of delivery is where the seller hands the goods to the carrier it contracted, and risk passes there. The named place of destination is the point written after the letters CIP, to which carriage and insurance run. Agree the place of delivery as precisely as the destination.¹ Write "CIP [named place of destination], Incoterms 2020" on every document, with the place of delivery on a separate line.

Who contracts and pays carriage under CIP

The seller contracts the carrier and pays carriage to the named destination, completes export formalities, and meets transport security requirements at its own cost and risk.¹ The buyer handles import formalities and customs procedures in countries the goods pass through in transit.¹ The seller must notify the buyer that delivery has occurred.¹

The CIP price guide sets out the same build from the price side.

How sea freight inside a CIP price is calculated

Sea freight is a basic rate for the route, container type and size, plus surcharges.² The basic freight charge is the standard fee for transporting goods from the port of origin to the port of destination, typically calculated per container.² Distance, cargo type, fuel prices, port charges, exchange rates, season and capacity all move the rate.² Every CIP quotation needs a validity date.

Full container load: one rate per container

For a full container load (FCL), one shipper books an entire container exclusively for its own cargo.³ The charge is a fixed rate per container regardless of how much of it the cargo fills: cargo filling 80 percent of a 20-foot container pays the same rate as cargo filling all of it.³

Shared loads: the greater of weight and volume

For a less than container load (LCL), cargo shares a container with other shippers' goods, combined by a forwarder and separated again at the destination.³ LCL freight is charged per cubic metre or per ton, whichever is greater: one cubic metre counts as one volume ton and one metric ton counts as one weight ton, and the higher figure is billed.²

Example figures: a shared load measures 3.2 cubic metres and weighs 2,100 kilograms, so the chargeable quantity is 3.2 revenue tons. At an example rate of USD 110 per revenue ton, basic LCL freight is USD 352, before surcharges, consolidation charges and the premium. LCL also carries consolidation and freight station fees at both ends.³ Break-even is typically 12 to 15 cubic metres.³

How air, road and rail legs inside a CIP price are calculated

CIP works for any mode of transport, including combinations of modes. Where several carriers handle successive legs, delivery occurs on handover to the first carrier while the seller pays carriage across the whole chain to the named destination.¹

Air legs bill chargeable weight

Airlines charge for the greater of actual weight and volumetric weight.⁴ Volumetric weight converts the space cargo takes up into kilograms using the IATA standard divisor of 6,000: multiply length, width and height in centimetres, then divide by 6,000.⁴

Example figures: one carton of 100 cm by 60 cm by 80 cm gives a volumetric weight of 80 kg. If the scale weight is 55 kg, the airline bills 80 kg; if it is 95 kg, it bills 95 kg. Confirm the divisor and rounding rule; some express services use 5,000.⁴

Road and rail legs follow the inland destination

A road or rail leg is normally priced per shipment, per vehicle or per container for the distance and route, with its own handling and terminal lines. CIP is often the rule buyers reach for when the named destination sits inland, because the seller's carriage duty can run to a rail terminal or inland depot. Name the terminal, town and country in full, and ask whether the carriage figure includes unloading there, since unloading is for the buyer unless the carriage contract says otherwise.

The surcharge build: what moves a carriage figure after the quote

Surcharges sit on top of the basic rate, each with its own basis and date. On a sea leg the surcharges most often seen are the bunker adjustment factor (BAF), from fuel prices and voyage distance, the currency adjustment factor (CAF), from exchange rate movements, terminal handling charges (THC) at origin and destination, typically per container, and peak season and security surcharges.² Ask for each surcharge as a separate line, with the date that fixes it and whether it is fixed or floating.

The insurance premium line: inside the CIP price, separate from the insured amount

The insurance premium is part of the seller-paid build inside the CIP price. Under CIP the seller must obtain cover compliant with the Institute Cargo Clauses (A), or similar clauses, while Clause (C) remains the default level for CIF.⁵ The cover must reach at least 110 percent of the contract price, in the contract currency, run from delivery to at least the named destination, and be issued so the buyer can claim directly.¹

The premium line in the worked example below is USD 185, illustrative only, buying cover for an insured amount of USD 32,747. A premium-only line, with no clause, insured amount, currency, period of cover or claim route, cannot be checked; send it back for those details before ranking the quotation.

Inside the CIP price, outside it: the destination-charge boundary

Destination charges are the most common second bill in a CIP file, because the same phrases name charges on both sides of arrival. Terminal handling charges cover storage and positioning of containers before loading, loading and unloading, storage, documentation, labor and cargo security.⁶ They split into origin, destination and transshipment handling, and who pays each end follows the contract of sale and the contract of carriage.⁶ Origin handling is inside the seller's build unless stated otherwise. Destination handling sits inside the seller-paid carriage only where the carriage contract says so; otherwise the buyer pays it on arrival, with delivery order fees, import clearance, duty and taxes, and onward transport.

Demurrage accrues when a container exceeds free time on a marine terminal, while detention is charged for extended use of intermodal equipment beyond free time.⁷ Incoterms 2020 does not fix who bears those time charges, so the carriage contract and the forwarder's quotation must state the position, with the free days and the empty-return depot recorded before arrival.

Worked example: one container of cotton T-shirts, Chattogram to Felixstowe

Example figures in this section are illustrative only, not a quotation or a market rate. A buyer agrees "CIP Felixstowe, Incoterms 2020" for 12,000 cotton T-shirts, handed to the first carrier at an inland container depot in Bangladesh and carried by sea in one 40-foot container to Felixstowe.

The minimum insured amount is 110 percent of USD 29,770, which is USD 32,747, in the contract currency.¹ The buyer-paid arrival lines below sit outside that price.

The CIP price alone under-budgets arrival by USD 805 before duty and tax.

Reading a CIP freight quotation: the seven lines to get in writing

1. Rule, named place of destination, place of delivery, first carrier and Incoterms 2020, in identical wording on every document.

2. Carriage build leg by leg: basic rate, each surcharge, origin handling and documentation fees as separate lines, with basis, date and validity.

3. Shipment shape for each leg: container type and size, or weight, volume and chargeable quantity, and the divisor and rounding rule for an air leg.

4. Insurance line checked separately: clause letter, insured amount at 110 percent of the contract price, currency, period of cover, and a direct claim route.

5. Destination lines marked one by one: terminal handling, unloading, delivery order fee, storage, demurrage and detention, each inside or outside the carriage contract, with free days recorded.

6. Export set complete before handover: a Bill of Export submitted to Customs and approved, with the export contract, invoice, packing list, EXP form, certificate of origin, VAT certificate and TIN enclosed.⁸

7. Arrival file agreed: delivery notice, transport document, insurance document, invoice, packing list and certificate of origin, with the destination broker appointed before sailing.

Freight-cost mistakes that survive the quotation

Reading "prepaid" as all-in. Prepaid means the seller has paid the main carriage to the named destination. It does not mean the seller has paid destination handling, clearance, duty or onward transport. Ask for the line-by-line split.

Treating "local charges" as one charge. The same phrase names the origin charge and the destination charge. Ask which end each line belongs to, and which payer it falls on, before comparing quotations.

Comparing a CIP total with a CIF or FOB total as if they covered the same journey. CIF is a sea and inland waterway rule only, with risk passing on board the vessel and a lower Clause (C) insurance minimum.⁵ FOB leaves main carriage to the buyer. The CIF freight cost guide and the CPT freight cost guide show the same build under different payer splits.

Accepting a single carriage total for a multimodal movement. A total that hides leg bases cannot be checked when one leg is repriced. A CIP figure running by sea, road and rail needs a line per leg: per container, per revenue ton or per chargeable kilogram.

Letting the validity date lapse unnoticed. Freight and surcharge lines move with fuel, currency and season. A quotation without a validity date, or a booking made after the date passed, can be repriced without warning.

How Exportain helps

On Exportain, post a request for quotation stating the goods, quantity, CIP term in full with the named destination and place of delivery, and ask each supplier to return the seven lines above. Comparing replies on the same lines makes two CIP quotations comparable. Exportain is a B2B marketplace where buyers post RFQs, receive quotations and message suppliers.

What should I know first about CIP?

Know first that CIP splits cost from risk: the seller contracts and pays carriage and insurance to the named destination, while risk passes to the buyer at handover to the first carrier.¹ The freight cost is the seller's carriage contract, priced leg by leg, and the buyer still pays destination charges outside that contract, import clearance, duty and onward transport. Name both places in the contract before the goods move.

What are the typical costs and timelines?

There is no typical CIP freight cost or transit time that holds for every order, because cargo form, mode, route, gateway and destination schedule all change the total. The structure is stable: a seller-paid carriage build, an insurance premium inside the price, plus buyer-paid destination charges, clearance, duty and onward transport. Ask for sailing, arrival and free days in writing.

Which documents are needed?

The buyer-side set is the transport document for the mode used, the insurance document, the commercial invoice, the packing list, the certificate of origin and the delivery notice with the handover receipt. Export clearance in Bangladesh requires an approved Bill of Export with its enclosed documents before loading or stuffing.⁸ Check the insurance document first: clause, insured amount, currency, period of cover and claim route.

What are the most common mistakes?

Reading prepaid freight as an all-in price, treating local charges as one charge, comparing CIP totals with CIF or FOB totals for different journeys, accepting a single carriage total for a multimodal movement, and letting the validity date lapse. Fix each by getting the carriage build in writing leg by leg.

Next steps on Exportain

Compare CIP with the other ten rules in the Incoterms guide for shipments from Bangladesh, and work the buyer-side costs into your landed cost calculation before you accept a quotation. When the places and the carriage build are fixed, post a free RFQ with the CIP term, the named destination and the place of delivery. Read how to buy for the buying steps.