Incoterms, Contracts and Allocation of Responsibility

Introduction and Context

International trade involves more than moving goods from a seller to a buyer. The parties must determine who arranges transport, who pays freight and insurance, who prepares export and import documents, when risk transfers, and who bears the consequences of loss or damage. These questions become particularly important when goods pass through several countries, are handled by multiple carriers, or are transported using combined modes.

Incoterms® rules provide a standard vocabulary for allocating selected responsibilities between sellers and buyers in contracts for the sale of goods. The current edition is Incoterms® 2020, published by the International Chamber of Commerce (ICC). Incoterms are not a complete contract of sale and do not replace transport contracts, insurance policies, payment clauses, or national law. They operate as contractual rules when the parties incorporate them clearly into their agreement.

This chapter examines the relationship between Incoterms, sales contracts, transport contracts, insurance, customs formalities and documentary obligations. It also develops a method for selecting and applying an appropriate rule in practical transactions.

Learning Objectives

By the end of this chapter, the learner should be able to:

1. Explain the purpose, scope and limitations of Incoterms® 2020.
2. Distinguish delivery, transfer of risk, transfer of ownership and allocation of costs.
3. Classify the eleven Incoterms rules according to transport mode and level of seller responsibility.
4. Determine the delivery point and risk-transfer point under a selected rule.
5. Compare the duties of sellers and buyers regarding transport, insurance, customs and documentation.
6. Identify the relationship between a contract of sale and a contract of carriage.
7. Select suitable terms for different cargo, transport and commercial situations.
8. Detect common drafting errors and manage operational and legal risks.

1. The Contractual Architecture of an International Sale

An international transaction usually involves several connected but legally distinct relationships:

• Sales contract: agreement between seller and buyer concerning the goods, price, delivery term, payment and other conditions.
• Contract of carriage: agreement between a shipper and a carrier to transport goods.
• Insurance contract: agreement under which an insurer covers specified risks in return for a premium.
• Customs relationship: obligations owed to importing and exporting states.
• Financing and payment relationship: for example, an open-account arrangement, documentary collection or letter of credit.

Incoterms primarily regulate selected obligations in the sales contract. They do not automatically bind the carrier, insurer, customs authority or bank. A seller may be responsible to the buyer for arranging carriage under an Incoterm while the carrier remains contractually responsible under a separate bill of lading or sea waybill.

1.1 Incoterms are not a complete sales contract

An Incoterm normally does not determine:

• the description, quality or quantity of goods;
• the contract price or currency;
• payment timing and credit risk;
• transfer of ownership or title;
• remedies for breach;
• applicable law and dispute resolution;
• force majeure;
• sanctions and export-control compliance;
• product liability;
• intellectual-property rights; or
• the consequences of insolvency.

These matters must be addressed elsewhere in the contract. A correct Incoterm cannot cure an incomplete sales agreement.

1.2 The three concepts that must not be confused

Delivery is the point at which the seller fulfils the delivery obligation under the selected Incoterm. It is a contractual concept.

Transfer of risk is the point at which the risk of loss or damage moves from seller to buyer. In the Incoterms rules, risk generally transfers at delivery, although the exact location and circumstances depend on the rule.

Transfer of ownership is the movement of title to the goods. Incoterms do not determine ownership. Title may transfer on payment, on delivery, on identification of goods, or according to the governing law and the sales contract.

A buyer may therefore own goods while the seller still bears a particular transport obligation, or the buyer may bear transport risk before the seller has completed all documentary duties.

2. Structure of Incoterms® 2020

There are eleven rules. Seven apply to any mode or combination of modes of transport, while four apply only to sea and inland-waterway transport where delivery occurs alongside or on board a vessel.

2.1 Rules for any mode of transport

2.2 Rules for sea and inland-waterway transport

The transport-specific rules should not be used merely because goods travel by sea. For containerised cargo delivered to a terminal before loading, FCA is often more appropriate than FOB because the carrier or terminal typically takes custody before the goods are loaded on board the vessel.

3. The A1–A10 and B1–B10 Allocation Model

Incoterms® 2020 presents seller obligations as A1–A10 and buyer obligations as B1–B10. The structure assists systematic analysis.

This model should be read together with the specific rule. The headings are consistent, but the content differs. For example, the seller has an insurance obligation under CIP and CIF, but not under CPT or CFR.

4. Delivery Points and Transfer of Risk

The central operational question is: Where and when has the seller delivered the goods? The answer determines risk transfer, even if the seller pays freight beyond that point.

4.1 The “C” rules: carriage paid, risk transferred earlier

Under CPT, CIP, CFR and CIF, the seller pays for carriage to a named destination or port. However, risk transfers at the shipment point, not when the goods arrive at the named destination.

For CPT and CIP, risk normally transfers when the seller hands the goods to the first carrier, unless the contract specifies a different delivery arrangement permitted by the rule.

For CFR and CIF, risk transfers when the goods are placed on board the vessel at the port of shipment. The seller pays freight to the destination port, but the buyer bears the risk during the main sea voyage.

This separation between cost destination and risk-transfer location is one of the most important features of Incoterms.

4.2 The “D” rules: delivery and risk at destination

Under DAP, DPU and DDP, the seller bears risk until the goods reach the named destination. The rules differ regarding unloading and import clearance:

• Under DAP, the goods are delivered ready for unloading. The buyer normally unloads.
• Under DPU, the seller unloads the goods. DPU replaced DAT in Incoterms® 2020 and permits delivery at any named place, not only a terminal.
• Under DDP, the seller also performs import clearance and pays import duties and taxes, subject to local law and practical ability.

4.3 Named places must be precise

A term such as “CIP Mumbai” may be insufficient. The contract should identify the exact delivery and destination location, such as:

CIP, Buyer’s Distribution Centre, Bhiwandi, Maharashtra, India, Incoterms® 2020.

For port rules, the port and, where relevant, terminal should be identified. The named place should be operationally accessible and consistent with the carrier’s route, customs process and unloading arrangements.

5. Detailed Examination of the Eleven Rules

5.1 EXW – Ex Works

EXW places the greatest operational burden on the buyer. The seller makes the goods available at its premises or another named place. The seller is not generally required to load the goods onto the collecting vehicle or clear them for export.

EXW may be suitable for domestic transactions or situations where the buyer can legally and practically manage export formalities. It can be problematic in international trade because a foreign buyer may be unable to obtain export declarations or evidence of export in the seller’s country. In such cases, FCA is often preferable.

5.2 FCA – Free Carrier

Under FCA, the seller delivers goods to the carrier or another person nominated by the buyer at a named place and completes export clearance.

If delivery occurs at the seller’s premises, the seller loads the goods on the buyer’s collecting vehicle. If delivery occurs elsewhere, the seller brings the goods to that place ready for unloading. Incoterms® 2020 also accommodates an agreed bill-of-lading notation in certain FCA transactions, which may assist documentary-credit transactions where an on-board bill of lading is required.

FCA is widely suitable for containerised, multimodal and air-freight shipments.

5.3 CPT – Carriage Paid To

The seller contracts and pays for carriage to the named destination but transfers risk when the goods are handed to the carrier. The seller has no obligation to insure the goods.

CPT is appropriate where the buyer wants control over insurance or already has an annual cargo policy. The contract should identify the delivery point and the destination separately where necessary.

5.4 CIP – Carriage and Insurance Paid To

CIP follows the same risk structure as CPT but requires the seller to obtain cargo insurance. Incoterms® 2020 generally requires higher insurance coverage under CIP than under CIF, commonly reflecting Institute Cargo Clauses (A) or equivalent coverage, subject to permitted exclusions and contractual details.

The buyer should examine the policy carefully. “Insurance included” does not mean that every loss is covered. The parties should confirm insured value, currency, deductible, exclusions, claims procedure, geographical scope and whether war and strike risks are included.

5.5 DAP – Delivered at Place

The seller bears the costs and risks of transport to the named destination. Goods are delivered ready for unloading. The buyer handles unloading and import clearance, duties and taxes.

DAP may be useful where the seller has strong international logistics capability but the buyer is better placed to manage local customs and tax matters.

5.6 DPU – Delivered at Place Unloaded

DPU is the only Incoterms rule requiring the seller to unload goods at the destination. The seller should confirm that it can safely arrange unloading equipment, labour, access and permits. DPU may be unsuitable where the destination is congested, lacks unloading infrastructure or presents uncertain site conditions.

5.7 DDP – Delivered Duty Paid

DDP imposes the broadest obligations on the seller. The seller arranges carriage, export clearance, import clearance and payment of duties and taxes, and bears risk to the named destination.

DDP should not be selected automatically as a customer-service term. In some countries, a non-resident seller cannot act as importer of record, recover import VAT, obtain required licences or comply with product regulations. DAP may be a safer alternative where the buyer must undertake import formalities.

5.8 FAS – Free Alongside Ship

The seller delivers goods alongside the vessel at the named port of shipment, for example on a quay or barge. Risk transfers at that point. FAS is principally suited to bulk or non-containerised cargo where goods are positioned alongside the vessel before loading.

5.9 FOB – Free on Board

The seller delivers goods on board the vessel nominated by the buyer at the named port of shipment. Risk transfers once the goods are on board.

FOB is often misused for container shipments. Containers are commonly handed to a terminal or carrier well before vessel loading, making FCA more conceptually accurate. FOB may remain appropriate for certain bulk or break-bulk shipments where the seller delivers directly on board.

5.10 CFR – Cost and Freight

The seller delivers goods on board the vessel and pays freight to the named destination port. Risk transfers at the port of shipment. The seller is not required to purchase cargo insurance.

CFR should be distinguished from DAP: under CFR the buyer bears voyage risk after loading, while under DAP the seller bears risk to destination.

5.11 CIF – Cost, Insurance and Freight

CIF is similar to CFR but requires the seller to obtain marine insurance. The minimum insurance obligation under CIF is generally narrower than the standard insurance obligation under CIP. CIF is intended for sea and inland-waterway transport and is not a general multimodal rule.

6. Cost Allocation Beyond Freight

A professional application of Incoterms requires more than identifying the transport payer. Costs may include:

• export packaging and marking;
• inland collection;
• terminal handling;
• loading and unloading;
• main carriage;
• transhipment;
• security surcharges;
• customs brokerage;
• export duties and taxes;
• import duties, VAT and other taxes;
• inspections and certificates;
• storage and demurrage; and
• insurance premiums.

Incoterms allocate many routine costs, but unusual charges may still require express contractual treatment. For example, the parties should specify responsibility for destination terminal handling charges, detention, demurrage, customs examinations, dangerous-goods surcharges and costs caused by inaccurate documents.

A useful commercial principle is to allocate each cost to the party best able to control or prevent it. This does not replace the Incoterm; it supplements it through clear special clauses.

7. Documentation Duties

Documents may be required for customs, transport, payment, insurance, regulatory compliance and receipt of goods. Typical documents include:

• commercial invoice;
• packing list;
• export declaration;
• certificate of origin;
• transport document;
• insurance certificate or policy;
• inspection certificate;
• dangerous-goods declaration;
• import permits; and
• product conformity documents.

Incoterms identify general obligations to provide assistance and documents, but the sales contract should state document format, timing, language, electronic requirements and authentication. Documentary-credit transactions require particular care because a document may satisfy Incoterms obligations but fail the bank’s documentary requirements.

The seller should not promise an “on-board bill of lading” unless it can obtain one from the carrier. Under FCA, the parties may agree that the buyer instructs the carrier to issue such a document to the seller after loading, but operational cooperation is essential.

8. Incoterms and Transport Contracts

The party responsible under the sales contract for arranging carriage is not necessarily the party liable for every transport event. The transport contract controls the carrier’s obligations, liability limits, claims deadlines and jurisdiction.

Important transport documents include:

• bill of lading for many sea shipments;
• sea waybill for non-negotiable sea transport;
• air waybill for air freight;
• consignment note for road transport; and
• rail consignment note for rail transport.

The sales contract should be consistent with the transport contract concerning:

• shipper and consignee identity;
• place of receipt and delivery;
• cargo description and weight;
• packaging and marks;
• delivery instructions;
• freight payment status; and
• claims notification.

A carrier’s liability may be limited by international conventions or national law. Incoterms do not enlarge those limits. The buyer or seller may therefore need cargo insurance even when the carrier is responsible for negligence.

9. Payment Terms and Incoterms

Payment arrangements affect the practical suitability of an Incoterm. Under a letter of credit, banks examine documents rather than the physical goods. A mismatch between the sales contract, Incoterm, invoice and transport document can cause refusal or delay.

For example, a buyer may request FOB while also requiring the seller to present an on-board bill of lading. If the seller does not control the vessel nomination or loading schedule, the documentary requirement may be difficult to meet. FCA with an agreed document procedure may be more suitable, but the bank’s requirements must be checked before contracting.

The parties should also distinguish:

• the date of shipment;
• the date of delivery under the Incoterm;
• the date of transfer of risk; and
• the date on which payment becomes due.

These dates may be different.

10. A Practical Method for Selecting an Incoterm

A reliable selection process contains six questions:

1. What transport mode is used? If transport is multimodal or containerised, begin with the seven all-mode rules. Use FAS, FOB, CFR or CIF only where sea or inland-waterway delivery is genuinely appropriate.
2. Who should arrange the main carriage? If the buyer controls it, consider EXW, FCA, FAS or FOB. If the seller arranges it, consider CPT, CIP, CFR, CIF or a D rule.
3. Where should risk transfer? At the seller’s premises, at handover to a carrier, on board, or at destination?
4. Who can perform customs formalities? Check importer-of-record rules, licences, tax registration and local representation before selecting DDP.
5. Who should arrange insurance? If the buyer has a global policy, CPT or CFR may be appropriate. If the seller should provide cover, consider CIP or CIF.
6. Is the named place precise and operationally realistic? Confirm terminal access, unloading capability, customs location and carrier route.

The chosen term should then be written in the form:

[Rule] [exact named place] Incoterms® 2020

Example: FCA Seller’s Loading Facility, Pune, India, Incoterms® 2020.

11. Worked Application

A manufacturer in India sells machinery to a buyer in Germany. The machinery is packed in containers and transported by truck to an Indian port, shipped by sea to Hamburg, and then moved by truck to the buyer’s factory. The buyer has an annual marine insurance policy and wants to manage import clearance. The seller can arrange export clearance and inland transport but does not want to bear destination risk.

Analysis:

• The movement is multimodal and containerised.
• FOB is not the best starting point because delivery occurs to a terminal before vessel loading.
• The buyer wants to arrange insurance, so CIP is unnecessary.
• The buyer wants to manage import clearance, making DDP unsuitable.
• The seller can arrange carriage, but risk should transfer at an early point.

Suitable term: CPT Buyer’s Factory, Hamburg, Germany, Incoterms® 2020, provided the contract clearly identifies the delivery point where the seller hands goods to the first carrier and states that the buyer is responsible for insurance and import clearance.

An alternative is FCA Seller’s Facility, Pune, India, Incoterms® 2020, if the buyer prefers to control the entire transport operation. The commercial choice depends on freight purchasing capability, desired control and pricing.

12. Illustrative Case Study: Containerised Electronics Shipment

Background

A fictional electronics exporter in Vietnam sells high-value components to a distributor in Kenya. The goods travel by truck to a container terminal, by sea to Mombasa and then by truck to Nairobi. The purchase order states “FOB Mombasa,” although the seller is expected to deliver the packed container to the terminal in Vietnam. The buyer also asks the seller to insure the goods until Nairobi.

Problem

The order contains three inconsistencies:

1. FOB Mombasa identifies a destination port rather than the port of shipment.
2. The physical handover occurs at a container terminal before vessel loading.
3. FOB does not impose a seller insurance obligation, yet the buyer requests insurance to Nairobi.

Analysis

FOB is unsuitable because the seller is not delivering the container directly on board the vessel. In addition, the requested insurance obligation is inconsistent with FOB. The parties must separate the desired carriage arrangement from the insurance requirement.

Approach and solution

The parties revise the contract to CIP Buyer’s Warehouse, Nairobi, Kenya, Incoterms® 2020, if the seller is willing to arrange carriage and the specified insurance. Risk transfers when the goods are handed to the first carrier, while the seller pays carriage to Nairobi and obtains the required insurance.

If the buyer prefers to control insurance and carriage, the alternative is FCA Seller’s Warehouse, Vietnam, Incoterms® 2020, with separate clauses requiring the buyer to arrange transport and insurance.

The contract also specifies:

• exact warehouse and terminal locations;
• container loading responsibility;
• insurance coverage and insured value;
• export and import clearance responsibilities;
• delivery-document requirements;
• responsibility for demurrage and storage; and
• claims-notification procedures.

Outcome

The revised term aligns the named place, transport mode, risk transfer, insurance and operational responsibilities. The dispute risk is reduced because the sales contract no longer uses a port-based rule for a terminal handover.

Learning points

• A familiar term can still be inappropriate.
• Risk and cost may transfer at different locations.
• Insurance must be expressly connected to the selected rule and policy terms.
• Container shipments require careful distinction between terminal delivery and vessel loading.
• Special commercial requirements should be written in additional clauses.

13. Common Errors and Limitations

13.1 Treating Incoterms as ownership rules

Incoterms do not determine title. Ownership must be addressed separately.

13.2 Naming only a city or country

A city may contain multiple terminals, warehouses and customs points. Ambiguity creates disputes over delivery and risk.

13.3 Using FOB for every sea shipment

FOB may be inappropriate for containers or multimodal transport. FCA often reflects the actual handover more accurately.

13.4 Assuming freight payment means risk retention

Under C terms, the seller pays main carriage but risk transfers earlier.

13.5 Assuming insurance is comprehensive

CIF and CIP specify obligations to obtain insurance, not automatic protection against every loss. Coverage, exclusions and claim procedures must be reviewed.

13.6 Selecting DDP without checking local law

The seller may be unable to act as importer, pay taxes or obtain permits in the destination country.

13.7 Ignoring carrier liability limits

A carrier’s liability is commonly limited. Cargo insurance and contractual risk assessment remain important.

13.8 Failing to coordinate documents

Sales contracts, purchase orders, letters of credit, invoices and transport documents must use consistent terms, places and dates.

14. Governance, Compliance and Technology

International logistics is subject to export controls, sanctions, customs valuation rules, anti-bribery laws, product regulations, dangerous-goods requirements and data-protection obligations. Responsibility for customs clearance does not excuse either party from complying with mandatory law.

Digital platforms and electronic transport documents can improve visibility and reduce errors. However, electronic records must be legally recognised, securely authenticated and accepted by carriers, customs authorities, banks and insurers. Artificial-intelligence tools may assist with document comparison, classification and anomaly detection, but human review remains necessary because an incorrect place name, tariff classification or insurance instruction can create substantial liability.

Good governance requires:

• approved Incoterm-selection policies;
• contract templates with clear named places;
• segregation of commercial and compliance approval;
• document-control procedures;
• sanctions and export-control screening;
• carrier and insurer due diligence; and
• post-shipment review of claims, delays and unexpected costs.

15. Best-Practice Checklist

Before signing an international sales contract, confirm that:

1. The edition is stated: Incoterms® 2020.
2. The rule matches the transport mode.
3. The named place is exact and operationally feasible.
4. Delivery and risk-transfer points are understood.
5. Transport and insurance responsibilities are aligned.
6. Export and import clearance responsibilities are legally possible.
7. Duties, taxes, terminal costs, demurrage and storage are addressed.
8. Transport documents match payment requirements.
9. Ownership, payment, governing law and dispute resolution are separately stated.
10. Packaging, dangerous goods, permits and product compliance are covered.
11. The carrier’s liability limits and cargo insurance are reviewed.
12. Special arrangements are recorded in clear additional clauses.

Chapter Summary

Incoterms® 2020 provide standard contractual rules for allocating selected delivery, transport, customs, insurance, documentation, cost and risk responsibilities between sellers and buyers. They do not determine ownership, payment, governing law, carrier liability or every aspect of an international sale.

The key analytical distinction is between the place where the seller pays for carriage and the place where risk transfers. Under the C rules, the seller may pay carriage to a destination while risk transfers at shipment. Under the D rules, risk generally remains with the seller until destination. FCA is often suitable for containerised and multimodal shipments, while FOB, CFR and CIF should be reserved for appropriate sea or inland-waterway delivery arrangements. DDP requires careful review of import-law and tax constraints.

Effective use of Incoterms requires precise named places, coordination with transport and insurance contracts, accurate documentation, and separate treatment of title, payment and legal remedies. The best term is not necessarily the one that gives one party the greatest responsibility; it is the term that reflects operational capability, legal authority, risk appetite and commercial control.

Key Terms

Incoterms® 2020: ICC rules allocating selected obligations in contracts for the sale of goods.

Delivery: Contractual completion of the seller’s delivery obligation under the selected rule.

Transfer of risk: The point at which the buyer assumes the risk of loss or damage.

Transfer of ownership: Movement of legal title, governed by the contract and applicable law.

Named place: The precisely identified location used in an Incoterm.

Carrier: A party that undertakes the carriage of goods.

Multimodal transport: Transport using two or more modes in one movement.

EXW: Rule placing minimum delivery responsibility on the seller.

FCA: Rule requiring delivery to a carrier and export clearance by the seller.

CPT: Carriage-paid rule without a seller insurance obligation.

CIP: Carriage-paid rule with a seller insurance obligation.

DAP: Destination rule in which goods are delivered ready for unloading.

DPU: Destination rule requiring the seller to unload the goods.

DDP: Destination rule requiring the seller to perform import clearance and pay duties, subject to legal feasibility.

FOB: Sea rule requiring delivery on board the vessel.

CIF: Sea rule involving carriage, freight and seller-arranged insurance.

Demurrage: Charges arising from exceeding permitted time for use of terminal or equipment.

Import of record: The legally responsible party for importing goods into a country.

Cargo insurance: Insurance covering specified risks affecting goods in transit.

Transport document: Evidence of a contract of carriage and/or receipt of goods.

Review Questions

5 Short Answer Questions

1. What is the difference between delivery and transfer of ownership?
2. Why is FCA often suitable for containerised shipments?
3. Under which rules does the seller have an insurance obligation?
4. What does DPU require the seller to do at destination?
5. Why must the named place in an Incoterm be precise?

5 Long Answer Questions

1. Explain the structure and commercial purpose of Incoterms® 2020.
2. Compare CPT, CIP, DAP and DDP in relation to carriage, insurance, customs and risk.
3. Discuss why FOB may be unsuitable for a container shipment.
4. Explain the relationship between a sales contract, a transport contract and an insurance contract.
5. Evaluate the legal and operational risks of selecting DDP for an international transaction.

3 Analytical / Application Questions

1. A seller hands containers to the first carrier at its warehouse and pays transport to the buyer’s city. The buyer arranges insurance and import clearance. Which Incoterm could be appropriate, and where does risk transfer?
2. A buyer requests “CIF Buyer’s Warehouse” for an air shipment. Identify the problems in this instruction and propose a more suitable alternative.
3. A contract states “FOB Port X, Incoterms® 2020,” but the seller must deliver cargo to a container terminal before vessel loading. Analyse the risks and redraft the delivery term.

Multiple Choice Questions with Answers

Question 1

Which Incoterms rule generally requires the seller to unload the goods at the named destination?

A. DAP

B. DPU

C. DDP

D. CIP

Correct Answer: B. DPU

Question 2

Under CPT, when does risk normally transfer?

A. When the goods arrive at the named destination

B. When the buyer completes import clearance

C. When the seller hands the goods to the first carrier

D. When the buyer pays the invoice

Correct Answer: C. When the seller hands the goods to the first carrier

Question 3

Which rule is generally most suitable as a starting point for a containerised multimodal shipment when the seller delivers to a carrier?

A. FCA

B. FOB

C. FAS

D. CIF

Correct Answer: A. FCA

Question 4

Which Incoterm places import clearance and payment of import duties generally on the seller?

A. DAP

B. CPT

C. FCA

D. DDP

Correct Answer: D. DDP

Question 5

What do Incoterms generally not determine?

A. Selected delivery obligations

B. Certain cost allocations

C. Transfer of ownership

D. Some documentation duties

Correct Answer: C. Transfer of ownership

Question 6

Under CIF, when does risk generally transfer?

A. When goods are placed on board the vessel at the port of shipment

B. When goods arrive at the buyer’s warehouse

C. When import duties are paid

D. When the insurance claim is settled

Correct Answer: A. When goods are placed on board the vessel at the port of shipment

Question 7

Which statement best describes DAP?

A. The seller delivers goods unloaded and import-cleared

B. The seller delivers goods ready for unloading, while the buyer normally handles unloading and import clearance

C. The buyer collects goods from the seller’s premises without export clearance by the seller

D. The seller delivers goods alongside the vessel

Correct Answer: B. The seller delivers goods ready for unloading, while the buyer normally handles unloading and import clearance

Question 8

Why may DDP be impractical in some countries?

A. The rule never permits seller-arranged transport

B. A foreign seller may be unable to act as importer of record or pay local taxes

C. DDP transfers risk at the first carrier

D. DDP prohibits the seller from clearing exports

Correct Answer: B. A foreign seller may be unable to act as importer of record or pay local taxes

Question 9

Which document is primarily associated with a contract of carriage rather than ownership transfer under Incoterms?

A. Transport document

B. Product catalogue

C. Sales forecast

D. Marketing plan

Correct Answer: A. Transport document

Question 10

Which statement about CIP and CIF is correct?

A. Neither rule involves seller-arranged insurance

B. CIF applies to all modes, while CIP applies only to sea transport

C. CIP is an all-mode rule, while CIF is intended for sea or inland-waterway transport

D. Both rules transfer risk only at the final destination

Correct Answer: C. CIP is an all-mode rule, while CIF is intended for sea or inland-waterway transport