Transfer of Risk

Transfer of Risk is a core concept in international trade, referring to the specific point in time when the risk of damage to or loss of goods during transportation passes from the seller to the buyer. This term is usually closely related to International Commercial Terms (Incoterms). Under different terms, the point of risk transfer varies. For example, under FOB, CFR, and CIF, risk transfers when the goods are loaded on board the vessel, while under DAP and DPU, it transfers upon delivery at the destination. Its usage scenarios mainly involve contract clause drafting, insurance arrangements, and dispute resolution. Points to note include: transfer of risk is not equal to transfer of title, nor is it equal to division of costs; the buyer and seller must clearly agree on the applicable Incoterms version (such as Incoterms 2020), and pay attention to the difference between actual delivery and symbolic delivery. The difference from 'Delivery' is that delivery emphasizes the actual act of handing over goods, while transfer of risk emphasizes the allocation of risk responsibility; unlike 'transfer of title,' transfer of risk may occur earlier or later than transfer of title. Foreign trade practitioners should accurately understand this term in order to reasonably allocate risk, choose insurance, and resolve disputes.