Choosing the wrong rule can leave a buyer paying for transport legs it did not expect, carrying risk it cannot insure properly or holding equipment at a port with nobody responsible for unloading. This guide explains how the 2020 rules apply to power equipment purchases.
What Incoterms do and do not cover
Incoterms rules define who arranges and pays for transport, where risk of loss or damage passes from seller to buyer, who handles export and import clearance and who must insure in two specific rules. They do not decide when ownership transfers, how payment is made or what happens if the contract is breached. Those points belong in the sale contract.
Always name the rule, the place and the edition, for example “FCA seller’s yard, Incoterms 2020”. A rule without a precise place is a common source of dispute.
The two groups of rules
Seven rules can be used for any mode of transport: EXW, FCA, CPT, CIP, DAP, DPU and DDP. Four are for sea and inland waterway only: FAS, FOB, CFR and CIF. Power equipment often moves by road, sea and sometimes rail in one journey, so the any-mode rules often fit better than the sea rules.
Our article on RoRo, breakbulk and container shipping for generators explains how the transport mode affects handling.
EXW and FCA at the factory or yard
Under EXW, the buyer collects the equipment at the seller’s premises and handles everything, including loading and export clearance. For heavy generators and turbines, loading alone can be a major lift, so EXW often leaves the buyer with tasks it cannot easily perform abroad.
FCA at the seller’s premises is usually a better choice for buyers who want control of the main transport. The seller loads the equipment onto the buyer’s collecting vehicle and clears it for export; risk passes once it is loaded.
FOB versus FCA for containers
FOB is widely used, but it is intended for goods loaded on board a vessel. Containerised gensets are usually handed to the carrier at a terminal well before loading, and the ICC recommends FCA rather than FOB in that case, so that risk passes at handover rather than on board.
For breakbulk turbines and transformers lifted onto a vessel, FOB can still suit, provided the loading port and responsibility for the lift are clearly stated.
CIF and CFR versus CIP and CPT
Under CFR and CPT, the seller pays carriage to a named destination, but risk passes to the buyer much earlier, at loading or at handover to the first carrier. CIF and CIP add an obligation for the seller to insure. Under Incoterms 2020, CIF requires only minimum cover, Institute Cargo Clauses (C), while CIP requires the wider Clauses (A).
For high-value power equipment, CIP’s higher default cover is often more appropriate. Our guide to cargo insurance for power equipment explains the difference between those clauses.
DAP, DPU and DDP to site
Under DAP, the seller delivers to a named place, ready for unloading, and carries risk until arrival. Under DPU, the seller also unloads. Under DDP, the seller additionally pays import duties and taxes and handles import clearance. Delivery to a remote site can be attractive to buyers, but it pushes many tasks onto the seller and is often priced accordingly.
DDP can be difficult where the seller cannot register as an importer in the buyer’s country. Check local rules before agreeing to it.
Unloading heavy items at destination
Unloading a turbine or large generator often needs cranes, jacking and skidding equipment. Under DAP, unloading is the buyer’s task, under DPU the seller’s. Make sure whoever is responsible has the equipment, permits and lifting plans in place, and that the delivery place can receive the load.
State in the contract exactly where the equipment will be set down, whether on a foundation, in a laydown area or at the port.
Import clearance and duties
Except under DDP, the buyer handles import clearance and pays duties and taxes. Power equipment may qualify for project exemptions or reduced duties in some countries, but these usually need applications and documents prepared in advance. Our article on customs clearance for gas turbine shipments lists typical documents.
Delays at customs can hold equipment for weeks, so start the import process before the equipment ships.
Choosing by capability
Pick the rule that places each task with the party best able to do it. A buyer with a freight forwarder, insurance programme and import experience may prefer FCA. A buyer with no logistics capacity in the origin country may prefer CIP or DAP. A project with a fixed energisation date may pay more for a delivered rule to keep transport risk with an experienced seller.
Whatever the choice, the logistics plan, insurance and schedule must all reflect it.
Common mistakes
Using FOB for containers, naming a vague place such as “Africa”, assuming CIF gives full insurance cover, forgetting that the rule does not transfer ownership, and leaving unloading responsibility unclear all cause trouble on power equipment deliveries. Mismatches between the Incoterms rule and a letter of credit’s document requirements are another frequent problem.
Review the rule with the freight forwarder, insurer and bank before signing. Our guide to how generators are shipped covers the transport side.
About our logistics team
This guide was prepared by our logistics coordinators, who move generators, turbines and station equipment from factories and yards to project sites. Moving plant is part of the EPC and O&M scope USP&E delivers in its own name, never as a broker, with 25,000 MW contracted since 2002, 24+ years of project logistics and 150+ power projects in 45+ countries. Our project delivery is described on the EPC projects page.
Offices: Colorado Springs (1755 Telstar Dr, Suite 300), Knoxville (800 S Gay St, Suite 700), London (162-168 Regent Street), Johannesburg (22 Kildoon Rd, Bryanston), Cape Town (31 Brickfield Road, Woodstock) and China (No. 1 Ningzhou Road, Wuxi). Regions: USA | AFRICA | UK | UAE | CHINA. ISO 9001 and ISO 45001 certified.
Incoterms questions for equipment buyers
Which Incoterms rule is best for buying a generator abroad?
It depends on the buyer’s logistics capability. FCA suits buyers who control the main transport; CIP or DAP suit buyers who want the seller to handle carriage.
Should FOB be used for containerised gensets?
The ICC recommends FCA rather than FOB for containerised goods, because containers are handed to the carrier before they are loaded on board.
Does CIF give full insurance cover?
No. Under Incoterms 2020, CIF requires only minimum cover, Institute Cargo Clauses (C). CIP requires the wider Clauses (A).
Do Incoterms decide when ownership passes?
No. Incoterms cover delivery, risk, costs and clearance. Transfer of ownership and payment terms belong in the sale contract.
Plan your delivery terms
Share the equipment list, origin and destination, and our logistics team can help you choose delivery terms and plan the route to site.
Phone +27 10 822 2324 during office hours, or write to info@uspeglobal.com at any time; the logistics enquiry page also routes straight to our project engineers. Equipment ready to ship is shown in our power equipment listings.