Incoterms 2020 for Magnetic Components: Who Owns the Risk and the Cost

Incoterms Decide Who Owns the Risk, Not Just Who Pays

Most purchase-order disputes on magnetic components are not about price or quality — they are about the point at which risk transfers and who is responsible for a shipment that arrives damaged or delayed. Incoterms 2020 answers those questions precisely, and the choice of term changes the real cost of the goods by 5–15 % once freight, insurance, duty, and clearing are included.

This note covers the terms that matter for wound components, their weight and fragility, and the specific traps.

The Four Terms Buyers Actually Use

Incoterms comparison for magnetic components
Term	Seller delivers	Buyer pays	Risk transfers	Typical use
EXW	At seller’s factory, not loaded	Everything after the factory gate	At the factory	Buyer has own forwarder and China presence
FOB (port)	On board the vessel at origin port	Ocean freight, insurance, import duty, destination charges	When cargo is on board	Most common for containerized components
CIF	On board plus freight and minimum insurance to destination port	Import duty, destination charges, inland delivery	On board (same as FOB)	Buyer wants a landed port price
DDP	At buyer’s door, duty paid	Nothing further	At destination	Small shipments, samples, e-commerce-like flows

The critical point: under CIF the seller arranges freight and insurance but risk still transfers at the origin port. Buyers who assume CIF means “risk until my door” discover otherwise when cargo is damaged mid-ocean.

What Changes for Heavy, Fragile Cargo

Weight and density. Transformers are heavy per cubic metre, so ocean freight is charged on weight or measure, whichever is greater. A carton of 500 VA units frequently goes by weight, and the freight per kilogram matters more than the volume.
Damage claims. Under FOB and CIF, damage after loading is the buyer’s risk. Photograph the container seal and the cargo condition at loading, and inspect on arrival before signing the delivery receipt — otherwise the claim is unwinnable.
Pallets and ISPM 15. Wood packaging must carry the IPPC stamp; a missing stamp can hold the shipment at the border under DDP and is the seller’s cost, but under FOB it becomes the buyer’s problem.
Duty and HS code. Under DDP the seller pays duty, which means the seller’s HS classification decides your landed cost, and an incorrect code can be reassessed later with penalties.

Choosing a Term Without Regret

For repeat container shipments, FOB with a nominated forwarder is usually the most controllable: you see the freight cost, you choose the carrier, and the risk boundary is unambiguous. For samples and small lots, DDP is convenient but hides the duty; ask for the HS code and the duty amount even when you are not paying it. For first orders from a new supplier, EXW plus a trusted forwarder gives maximum control at the cost of more work.

What to Write in the PO

Incoterm with the named place (e.g. “FOB Shanghai”, not just “FOB”).
Incoterms version (2020).
Packaging and pallet specification, including ISPM 15.
HS code and country of origin, for duty estimation.
Inspection point and who bears the cost of a third-party inspection.
Document requirements: commercial invoice, packing list, certificate of origin, test reports.