LAWS6059 Chap.7 Incoterms 2020: Risk, Cost and Delivery
Incoterms 2020: Risk, Cost and Delivery
Incoterms 2020 standardise delivery, cost, risk and specified obligations between seller and buyer. This chapter compares the E, F, C and D groups, insists on a precise named place and matches rules to transport mode. Its main warning is the C-term split: a seller may pay carriage to destination even though risk passed earlier at the first carrier or on board at shipment. Insurance and customs are analysed separately.
What this chapter covers
- 01
E, F, C and D obligation groups
- 02
Precise named place and version
- 03
Rules for any mode versus sea rules
- 04
CPT and CIP first-carrier risk
- 05
CFR and CIF shipboard risk
- 06
DAP, DPU and DDP arrival tasks
- 07
Insurance and customs allocation
Worked example · free
Replace a mismatched sea term for containers
- 1Identify CIF as a sea rule with risk passing on board.
- 1Locate operational container handover before vessel loading.
- 1Recommend FCA where risk should move at terminal handover.
- 1Consider CIP where seller-paid carriage and insurance are also required.
- 1State the exact place and Incoterms 2020 version.
Key terms
- Named place
- The precise location attached to an Incoterm where specified delivery or cost duties are anchored.
- Risk transfer
- The point at which transport loss or damage shifts between seller and buyer under the selected rule.
- C term
- An Incoterm under which the seller pays main carriage while risk transfers earlier.
- DPU
- Delivered at Place Unloaded, requiring the seller to unload at the named destination.
Incoterms 2020: Risk, Cost and Delivery FAQ
What do Incoterms decide?
They allocate delivery, costs, risk and specified obligations such as carriage, insurance and customs. They do not decide every contract issue, including formation, title, price and general remedies. Treat the selected rule as a delivery module inside a larger sale contract.
Why are C terms confusing?
The seller pays carriage to the named destination, but risk passes earlier at the first carrier for CPT and CIP or on board at shipment for CFR and CIF. Freight destination and risk point therefore need separate sentences.
Which rule fits an unloaded destination?
DPU requires the seller to unload at the named destination while the buyer handles import clearance. DAP leaves unloading to the buyer, and DDP shifts import clearance and duty to the seller. Choose by the actual logistics capacity.
Assessment move
Build one table with columns for permitted transport mode, delivery event, risk transfer, carriage cost, unloading, insurance, export clearance and import clearance. Add a final column for the exact named port or place, because the three-letter rule without a location is incomplete. Begin with the all-mode terms and the sea or inland-waterway terms as separate families.
Do not compare rules across families until you have checked whether the shipment is containerised, multimodal or genuinely port-to-port. Practise paired comparisons: CPT against CIP to isolate insurance; CFR against CIF for the same reason in the maritime family; DAP against DPU to locate unloading; and DAP against DDP to locate import clearance and duties.
For each pair, write three independent sentences covering delivery, risk and cost. This prevents payment of main carriage from being mistaken for retention of risk. Draw a route from seller’s premises through carrier, port, vessel, destination terminal and buyer, then place one marker for delivery and another for the end of carriage cost. If they coincide only under a particular rule, say so rather than assuming.
Add the insurance level described for the relevant 2020 rule and avoid promising that cargo insurance answers every loss. In a sales problem, keep the Incoterm alongside, not inside, the CISG analysis: use it to interpret delivery, risk and allocated tasks, while leaving validity, conformity and available remedies to their governing rules.
Write contractual clauses in the form ‘[rule] [named place] Incoterms 2020’ and test whether that location is operationally precise. Revise by moving the named place one stage along the route and observing which costs or risks change. Finish each answer with a handover statement: who must do what, where delivery occurs, when risk passes, who contracts carriage or insurance, and which party handles each customs frontier.
That concrete close is more reliable than memorising slogans such as seller pays or buyer bears risk. Use a blank logistics map and place cards for seller, first carrier, terminal, vessel, destination and buyer. Move distinct tokens for risk, cost and documents; never use one token for all obligations. Explain each movement aloud using the named place.
The physical exercise makes the split between an early risk point and seller-paid carriage memorable, particularly for the C terms.
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