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

Karlov GmbH in Germany sells equipment to Mendez SA in Chile on CIP Santiago terms (Incoterms 2020). Karlov hands the goods to the first carrier in Hamburg, and they are destroyed by fire in a transit warehouse in Rotterdam before reaching Chile. Karlov had arranged only minimum cover (Institute Cargo Clauses (C)) as it believed was sufficient. Which statement is most accurate?

Risk passed to Mendez SA when Karlov handed the goods to the first carrier, even though the seller pays for carriage to Santiago. Under CIP in Incoterms 2020 the seller must also insure at the higher Clauses (A) level, so Karlov's minimum cover was inadequate.

1. ARisk passed to Mendez SA on handing over to the first carrier, and Karlov was required to obtain insurance at the higher level of cover (Clauses (A)) for Mendez SA's benefitCorrect
2. BRisk remains with Karlov until the goods reach Santiago, because the named place is the destination
3. CRisk passed to Mendez SA on handing over to the first carrier, and Karlov's minimum cover (Clauses (C)) satisfied its obligation under CIP
4. DRisk passes to Mendez SA only when it pays the price, so Karlov bears the loss