Abstract: In international trade, the allocation of responsibilities, costs, and risks between buyers and sellers is essential for smooth and efficient transactions. The International Commercial Terms, widely known as Incoterms, are standardized trade terms published by the International Chamber of Commerce (ICC) that define the roles of trading partners. This paper evaluates the Incoterms 2020 rules with a specific focus on cost obligations and the transfer of risk between buyers and sellers during the delivery of goods.

The analysis covers how different Incoterms allocate transportation costs, insurance, and customs duties, while also determining the precise point at which the risk of loss or damage to goods transfers from seller to buyer. By comparing commonly used terms such as EXW (Ex Works), FOB (Free on Board), CIF (Cost, Insurance and Freight), and DDP (Delivered Duty Paid), the study reveals how the choice of Incoterm can significantly impact financial planning, legal liability, and logistics coordination.

Furthermore, the paper discusses how misunderstandings or misapplications of Incoterms can lead to disputes, delays, and unforeseen expenses in global trade. As supply chains become increasingly complex, understanding and applying the correct Incoterm is vital for risk mitigation and operational clarity.

Keywords: Incoterms, risk transfer, international trade, cost obligations, delivery terms

| DOI: 10.17148/IARJSET.2025.125269