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ACCA Applied Skills · Corporate and Business Law (Global) · Transportation documents and means of payment

Calder Co sells goods to Dunmore Inc on CIF Rotterdam terms (Incoterms 2020). The goods are loaded on board at the port of shipment on 3 May and are damaged by a storm at sea on 10 May. Which statement is correct?

Dunmore bears the loss because under CIF risk passes to the buyer once the goods are loaded on board at the port of shipment. Calder's duty to pay freight and arrange insurance does not keep risk with it, but Dunmore can claim on the insurance.

  1. ARisk passed to Dunmore on loading on board, so Dunmore bears the loss, though it may claim on the insurance Calder arrangedCorrect
  2. BRisk remains with Calder until the goods are unloaded at Rotterdam, so Calder bears the loss
  3. CRisk passes to Dunmore only when Dunmore pays the price

Explanation

Under CIF the seller delivers when goods are on board at the port of shipment, and risk passes then. The seller must buy minimum-cover insurance for the buyer's benefit, so the buyer bears the loss but can claim on the policy. The seller's obligation to pay for carriage and insurance does not extend risk to the destination.

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