Transportation Operations LINCS Practice Exam

What does the INCOTERM Carriage and Insurance Paid To (CIP) require from sellers?

1. They must provide transportation by sea

2. They must purchase cargo insurance in the buyers' names

3. They must handle customs clearance in the destination country

4. They must cover all shipping costs

The correct answer is: They must purchase cargo insurance in the buyers' names

The INCOTERM Carriage and Insurance Paid To (CIP) places specific obligations on sellers regarding transportation and insurance. One of the primary requirements is that sellers must purchase cargo insurance to cover the buyer's risk during transit. This insurance must be arranged in the buyer's name, ensuring that if any damage or loss occurs while the goods are being transported, the buyer will be compensated accordingly. In addition to this insurance obligation, sellers also bear responsibility for the costs associated with transportation and for ensuring that the goods reach the agreed destination. While sellers do handle several logistical aspects under this term, the focus of CIP is notably on providing insurance coverage for the buyer, which distinguishes it from other INCOTERMS that may not have the same insurance requirements.