Home / Videos / Incoterms 2020 explained: where risk passes under FOB, CIF, DAP and DDP
Video · 1:44
Incoterms 2020 explained: where risk passes under FOB, CIF, DAP and DDP
Where risk passes from seller to buyer under each Incoterms 2020 rule, how far the seller pays for carriage, who clears export and import, who must insure, and why FCA fits containers better than FOB, shown with Cargovate's free Incoterms risk explorer.
In this video
- 0:00Whose loss is it?
- 0:10Risk, cost, title and custody
- 0:24Pick a rule
- 0:35CIF
- 0:53Insurance: CIF and CIP
- 1:04Containers: FOB or FCA
- 1:17DAP and DPU
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Transcript
Under CIF, the seller pays the freight all the way to your port. So if the goods are damaged on the way, whose loss is it? Usually not the seller's.
Incoterms rules separate four things people often merge: risk, cost, title and custody. The rule decides risk and cost. It doesn't decide who owns the goods, and it doesn't mention who is holding them.
Pick a rule, and the explorer shows where risk passes from seller to buyer, how far the seller pays for carriage, who clears export and import, and who must insure.
Under CIF, risk passes when the goods are on board the vessel at the port of shipment, even though the seller pays the freight to the destination port. Four of the eleven rules, CPT, CIP, CFR and CIF, put risk and cost in different places.
CIF only requires minimum cover, Institute Cargo Clauses C. Since 2020, CIP requires the wider cover, Institute Cargo Clauses A.
Tick that the goods travel in a container, and FOB gets a warning: a container leaves the seller's hands at the terminal, often days before it's loaded. ICC guidance is to use FCA.
And under DAP, the seller delivers on the arriving vehicle, ready for unloading, and the buyer unloads. Under DPU, the seller unloads, and risk passes once the goods are unloaded.
It's free, it runs in your browser, and you can print the result. It's a general explanation, not legal advice: the ICC text and your contract govern. The link is in the description.