Incoterms 2020: which one to choose when importing machinery
EXW, FOB, CIF, DAP or DDP? What each Incoterm means, who pays for each leg and what risk you take on.
Incoterms are the International Chamber of Commerce rules that define, in an international sale, who pays for each part of the transport and at what point the risk passes from seller to buyer. The current version is Incoterms 2020. Choosing one or another changes the final price and, above all, who is liable if something goes wrong.
The most common ones when importing from China
- EXW (Ex Works): the seller makes the machine available at its factory. You handle everything: loading, export clearance, transport, insurance and import. The lowest price on paper, but the most work.
- FCA (Free Carrier): the seller delivers the goods, cleared for export, to the carrier you nominate. A cleaner alternative to EXW.
- FOB (Free On Board): the seller loads the goods on board the vessel at the port of origin. From then on, freight, insurance and risk are yours. Sea freight only, and one of the most widely used.
- CFR and CIF (Cost and Freight / Cost, Insurance and Freight): the seller pays the freight to the destination port (and, under CIF, minimum insurance), but the risk passes to you once the goods are on board at the port of origin.
- DAP (Delivered At Place): the seller pays transport to the agreed address; you handle import clearance and pay duties and VAT.
- DDP (Delivered Duty Paid): the seller takes care of everything, import included. Convenient, but you lose visibility over costs and lead times.
Which one suits you?
For industrial machinery, FOB or FCA usually strike the right balance: the manufacturer does what it does best (build, pack and deliver at origin) while international transport and customs stay with whoever manages the project at destination. That way you can compare freight rates, choose the right insurance and coordinate arrival with installation.
Remember that an Incoterm never covers transfer of ownership or payment: those must be agreed in the sales contract.
At NIC we choose the Incoterm with you on every shipment and manage transport and customs so the machine arrives when you need it.
