Appearance
The difference between EXW and DDP can be 15–30% of machine value in cost and risk. Many buyers choose FOB or CIF without understanding who bears ocean transit risk. Know your Incoterms before you sign.
Incoterms Overview for Machine Tools
| Term | Seller Responsibility | Buyer Responsibility | Risk Transfer Point |
|---|---|---|---|
| EXW | Make machine available at factory | All: loading, export, shipping, import, delivery | At seller's factory |
| FOB | Export packing, delivery to port, loading | Ocean freight, insurance, import, delivery | On board the vessel |
| CIF | Export packing, delivery to port, freight, insurance | Import customs, duties, inland delivery | On board the vessel |
| DDP | Everything including import duties and delivery | Nothing (receive at your door) | At buyer's facility |
Detailed Cost Breakdown
Cost Allocation by Term (for a $350,000 machine from Europe to US)
| Cost Component | EXW | FOB | CIF | DDP |
|---|---|---|---|---|
| Machine price | $350,000 | $350,000 | $350,000 | $350,000 |
| Export packing | Buyer | Seller | Seller | Seller |
| Inland transport to port | Buyer | Seller | Seller | Seller |
| Port handling (export) | Buyer | Seller | Seller | Seller |
| Ocean freight | Buyer | Buyer | Seller | Seller |
| Insurance | Buyer | Buyer | Seller | Seller |
| Import customs clearance | Buyer | Buyer | Buyer | Seller |
| Import duties and taxes | Buyer | Buyer | Buyer | Seller |
| Inland transport to buyer | Buyer | Buyer | Buyer | Seller |
| Approximate total cost | $420,000–450,000 | $410,000–435,000 | $400,000–420,000 | $390,000–410,000 |
Risk and Insurance
When Risk Transfers
Warning: Under both FOB and CIF, risk transfers to the buyer when the machine is loaded on board the vessel. If the ship sinks or the machine is damaged in transit, the loss is yours — even though the seller arranged shipping under CIF.
Insurance Coverage
| Term | Insurance Arranged By | Coverage Level | Gap |
|---|---|---|---|
| EXW | Buyer | As buyer chooses | Full control |
| FOB | Buyer | As buyer chooses | Full control |
| CIF | Seller | Minimum 110% of CIF value | May not cover inland legs |
| DDP | Seller | Full coverage | Included in price |
Recommendation: Under CIF, the seller's minimum insurance may not cover inland transport legs or installation risks. Request a copy of the insurance certificate and verify coverage scope.
Choosing the Right Model
Decision Matrix
| Your Situation | Recommended Term | Reason |
|---|---|---|
| First import, no logistics experience | DDP | Single point of responsibility |
| Established import operation | FOB | Best balance of cost and control |
| Buying domestically or nearby | EXW | Lowest machine price |
| Supplier insists on CIF | CIF with insurance review | Accept but verify coverage |
| Multi-machine container load | FOB | Consolidation savings |
Negotiation Points by Term
- EXW: Negotiate that seller assists with loading (loading injuries are seller's liability otherwise)
- FOB: Confirm what is included in "port charges" — some sellers exclude container loading fees
- CIF: Request the right to approve the shipping line and insurance provider
- DDP: Get a detailed cost breakdown — sellers often mark up customs brokerage and inland freight
Documentation Required
| Document | EXW | FOB | CIF | DDP |
|---|---|---|---|---|
| Commercial invoice | Buyer arranges | Seller provides | Seller provides | Seller provides |
| Packing list | Optional | Seller provides | Seller provides | Seller provides |
| Bill of lading | Buyer arranges | Seller arranges | Seller arranges | Seller arranges |
| Export customs docs | Buyer arranges | Seller provides | Seller provides | Seller provides |
| Insurance certificate | Buyer arranges | Buyer arranges | Seller provides | Seller provides |
| Import customs docs | Buyer arranges | Buyer arranges | Buyer arranges | Seller provides |
| Certificate of origin | Buyer requests | Buyer requests | Buyer requests | Seller provides |
FAQ
Which Incoterm is cheapest overall?
EXW gives the lowest machine price but the highest total buyer cost when logistics are included. DDP has the highest machine price but the lowest total buyer cost because the seller's logistics volume gets better shipping rates. The difference is typically 2–5%.
Should I let the seller arrange shipping under CIF?
Only if you trust their logistics capability and have verified insurance coverage. Otherwise, FOB gives you control over the shipping and insurance decisions.
What happens if the machine is damaged during FOB ocean transit?
The buyer's insurance claim pays for repair or replacement. The seller is not responsible because risk transferred at the vessel. This is why adequate insurance is essential under FOB.
How do I handle customs clearance for a deep hole drilling machine?
You need the machine's HS code (typically 8459.70 for drilling machines), commercial invoice, bill of lading, packing list, and certificate of origin. A licensed customs broker is recommended for first-time importers.
Can I change delivery terms after the contract is signed?
Rarely without cost adjustment. Changing from FOB to DDP mid-contract means re-quoting logistics, insurance, and customs costs. Agree on terms before signing.
Incoterms 2020 are the current standard. Verify which edition your contract references. This article reflects industry practice as of 2026.