FOB vs CIF vs DAP: Which Incoterm Is Right for Importing Food Machinery?
The shipping term you pick changes who pays for what — and who's liable when something goes wrong at sea. Here's how to read the trade-offs for a 20-tonne dairy line.
Incoterms are the three-letter shorthand that decides who pays for what at every leg of an international shipment — and crucially, who's liable when something gets damaged, lost, or held up at customs. Most food machinery from China ships under one of three: FOB, CIF, or DAP. Here's what each one really costs you.
FOB (Free On Board)
The supplier delivers the cargo to a named Chinese port and loads it onto the ship. From the moment the equipment crosses the ship's rail, it's your cargo. You're responsible for sea freight, marine insurance, destination port charges, customs clearance, and inland delivery.
Pros: You control your freight forwarder and your insurance — you can shop for better rates than the supplier offers. Most experienced importers prefer FOB for this reason.
Cons: You need a freight forwarder you trust at both ends. If you're new to importing, FOB pricing looks great until you get hit with surprise destination charges.
CIF (Cost, Insurance, and Freight)
The supplier handles cargo, insurance, and sea freight all the way to your destination port. Their responsibility ends when the cargo arrives at the port — you still handle customs clearance and inland delivery.
Pros: Simpler for first-time importers. One quote covers everything up to your port.
Cons: The supplier marks up the freight and insurance — typically 5–15% above what you'd pay direct. The insurance is usually the cheapest possible policy (Institute Cargo Clauses C), which excludes most of what could actually go wrong.
DAP (Delivered At Place)
The supplier delivers the cargo all the way to a named address — usually your factory door. They handle freight, insurance, destination port charges, and inland trucking. You still handle customs clearance and any duties or taxes.
Pros: Maximum simplicity. You sign the PO, you wait, equipment shows up at your gate.
Cons: Most expensive option (15–25% above FOB). The supplier is taking on all the risk and bundling the cost.
Worked example: 20-tonne dairy line, Shanghai → Lagos
Approximate numbers for a typical line:
- FOB Shanghai: $180,000 equipment + you pay freight ($4,500), insurance ($600), port charges in Lagos ($1,800), customs broker ($1,200), inland trucking ($800). Total landed: ~$188,900.
- CIF Lagos: $186,500 — covers freight + insurance. You still pay port charges, broker, trucking. Total landed: ~$190,300.
- DAP Lagos factory: $194,000. Covers everything except duty and customs broker. Total landed: ~$195,200.
Which to pick
- You're a seasoned importer with a forwarder you trust: FOB. You'll save 5–10%.
- This is your first or second food-machinery import: CIF. The premium buys peace of mind.
- You want a single number and zero hassle, and budget isn't tight: DAP.
Whatever Incoterm you pick, always demand the supplier provide an itemized invoice — not just a lump sum. You need to be able to declare equipment value separately for customs duty calculation.
One last thing: insurance
If you go with FOB, buy your own marine insurance. The minimum spec is "All Risks" (Institute Cargo Clauses A) covering 110% of CIF value. Premium is typically 0.3–0.5% of insured value — so for a $180k line, you're paying $540–$900. That's nothing compared to what a port-strike or hurricane could cost you.
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