Incoterms for Heavy Fabrication: EXW, FOB and CIF Compared
Three quotes arrive for the same frame. One is 18% below the others and it wins the order. Four months later the landed cost is the highest of the three, because that quote was EXW and the other two were FOB.
This is the most common avoidable mistake in heavy fabrication sourcing, and it takes one line in the RFQ to prevent.
Fix the Incoterm before you ask for prices. Not after.
What an Incoterm actually does
An Incoterm allocates three things between seller and buyer:
- Cost: who pays for each leg
- Risk: at what precise point damage becomes the buyer’s problem
- Obligation: who arranges carriage, export clearance, import clearance and insurance
It does not set the price, transfer title, or constitute a contract. It is shorthand for a division of responsibility, and both parties need to mean the same thing by it.
Always write the term with a named place and the rules edition: “FOB Ho Chi Minh City (Incoterms 2020)”. “FOB” alone is ambiguous, and in the US it is sometimes used domestically in a way that differs from the international rule.
The three that matter for heavy fabrication
EXW, Ex Works
The seller makes the goods available at its own premises. That is the whole obligation.
- Seller pays: nothing beyond making the goods available, adequately packed
- Buyer pays: loading, inland transport, export clearance, terminal handling, ocean freight, insurance, import duty, delivery
- Risk transfers: at the seller’s gate
The trap: under a strict reading, the buyer is responsible for export clearance in the seller’s country, a process a foreign buyer usually cannot complete. In practice the seller assists, but “assists” is not “is obliged to”, and if something goes wrong at customs it is your problem in a jurisdiction you do not operate in.
Use EXW when: you have a freight forwarder with a real presence in Vietnam who will handle collection and export clearance as your agent. Otherwise avoid it.
FOB, Free On Board
The seller delivers the goods on board the vessel at the named port. Export clearance is the seller’s obligation.
- Seller pays: inland transport, export clearance, terminal handling, loading on board
- Buyer pays: ocean freight, insurance, import duty, delivery at destination
- Risk transfers: when the goods are on board
Why it suits heavy fabrication: the seller handles the part that needs local knowledge, the oversize road permit, the port booking, the export paperwork, and you keep control of the ocean leg, the carrier and the insurance.
Use FOB when: it is your first order with a supplier, or whenever you want visibility of the freight cost as a separate number rather than buried in a unit price.
FOB is the sensible default for most buyers of heavy frames.
CIF, Cost, Insurance and Freight
The seller arranges and pays for carriage to the named destination port and takes out insurance.
- Seller pays: everything to the destination port, plus insurance
- Buyer pays: import duty, customs clearance, delivery from port
- Risk transfers: still when the goods are on board at origin, despite the seller paying the freight
That mismatch catches people. Under CIF you carry the risk across the ocean while the seller holds the contract with the carrier. If the cargo is damaged in transit you claim on the insurance, which is why the level of insurance matters.
The insurance trap: CIF only obliges the seller to buy minimum cover (Institute Cargo Clauses C), which excludes a great deal. For a machined frame worth six figures, that is inadequate. If you accept CIF, specify Institute Cargo Clauses A at 110% of invoice value in the contract.
Use CIF when: you have no forwarder relationship and would rather the supplier handle it, and you have specified the insurance properly.
A note on FOB, CIF and containers
Strictly, FOB and CIF are maritime terms intended for bulk and breakbulk cargo where “on board” is a meaningful moment. For containerised cargo handed over at a terminal, the technically correct equivalents are FCA and CIP.
In practice the heavy fabrication trade uses FOB and CIF for everything, and everyone understands what is meant. The distinction becomes real if cargo is damaged between the terminal gate and the ship’s rail, under FOB that gap is nominally the seller’s, under FCA it is yours from the terminal. For genuinely oversize breakbulk cargo, FOB is both conventional and technically appropriate.
Building a comparable landed cost
Whatever term you use, model the whole chain so the quotes can be compared:
| Line | EXW | FOB | CIF |
|---|---|---|---|
| Ex-works price | Seller | Seller | Seller |
| Loading at shop | Buyer | Seller | Seller |
| Inland to port | Buyer | Seller | Seller |
| Export clearance | Buyer | Seller | Seller |
| Terminal handling, origin | Buyer | Seller | Seller |
| Ocean freight | Buyer | Buyer | Seller |
| Marine insurance | Buyer | Buyer | Seller (minimum) |
| Terminal handling, destination | Buyer | Buyer | Buyer |
| Import duty | Buyer | Buyer | Buyer |
| Customs brokerage | Buyer | Buyer | Buyer |
| Delivery to site | Buyer | Buyer | Buyer |
Note the bottom four rows: nobody but you pays import duty, under any of these terms. For US buyers in 2026 that is the largest single line after fabrication, see Section 232 and imported steel frames.
If you want the supplier to deliver to your door with duty paid, that is DDP, and very few Asian fabricators will offer it because it makes them the importer of record in your country.
How the Incoterm changes the customs value in the US and the EU is set out in our guide to importing heavy steel fabrications and in landed cost of a heavy steel frame.
Oversize cargo changes the arithmetic
For a frame that will not fit a container, the ocean leg stops being a commodity. Out-of-gauge and breakbulk rates are quoted per shipment and vary enormously with vessel availability and routing, see out-of-gauge and breakbulk shipping.
Under CIF, that variability sits with the seller, which sounds attractive until you realise they have priced their worst case into your quote. For oversize cargo, FOB plus your own project-freight forwarder usually costs less and always gives you more information.
What to put in the RFQ
One line: “Quote FOB Ho Chi Minh City, Incoterms 2020. Please state packing type, gross weight, and dimensions of each package.”
Those three extra data points let your forwarder quote the ocean leg immediately, and let you compare suppliers on a true landed basis rather than a unit price.
Want a quote with the Incoterm fixed and the freight shown as its own line rather than folded into the price? Send the drawing and the destination port. We will come back within 24 business hours.