Incoterms 2020 for Industrial Equipment Buyers
A plain-language guide to EXW, FOB, CIF, CIP, DAP and DDP — and how to pick the right Incoterm for a cross-border equipment tender.
Incoterms (ICC — Incoterms 2020) allocate three things between buyer and seller: who pays, who arranges, and where risk transfers. They do not decide who owns the goods, and they do not replace a contract — but pick the wrong term and every quote in your tender becomes impossible to compare.
The four terms that cover 90% of industrial equipment tenders:
EXW (Ex Works). Buyer takes over at the factory gate. Lowest supplier price on paper, highest hidden logistics burden for the buyer. Only sensible when the buyer has a strong freight forwarder in the country of origin.
FOB (Free on Board — sea freight only). Supplier delivers on board a named vessel; risk transfers at the ship's rail. Standard for container shipments where the buyer controls ocean freight and insurance.
CIF (Cost, Insurance & Freight — sea freight only). Supplier arranges freight and minimum insurance to the destination port. Convenient, but the insurance cover is thin — buyers often top it up.
CIP / DAP / DDP. CIP is the multi-modal equivalent of CIF with fuller insurance. DAP delivers to a named destination with duties unpaid; DDP delivers with duties paid. DDP is the simplest for buyers and the riskiest for suppliers — expect a price premium.
How to use Incoterms in an RFQ. Fix a single Incoterm for the tender and require every supplier to quote against it. Also require a separate line for optional inland freight and installation. Mixing Incoterms across bids is the single most common reason technical evaluations get overturned by commercial noise.
Red flags. EXW quotes without a nominated freight forwarder · CIF quotes with insurance below 110% of invoice value · DDP quotes that exclude local VAT · any term used for a mode of transport it is not designed for (FOB for airfreight, for example).
See also: How to Prepare an Industrial RFQ and the International Trade Resources reference sheet.
Frequently asked
CIP or DAP to a named inland destination usually offers the best balance: the supplier handles international logistics and insurance, and the buyer only manages import clearance and site delivery.
No — normalize every bid to the same Incoterm before comparing. Ask separately for optional add-ons (inland freight, installation, commissioning) as line items.
No. Incoterms cover cost, logistics and risk transfer. Title (ownership) is governed by the sale contract and the applicable law — spell it out separately.