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Buying Custom Automation Equipment: FAT and Incoterms® 2020 Explained

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Buying Custom Automation Equipment: FAT, EXW, FCA, FOB and CIF Explained

Containers on an ocean-going cargo ship

Buying custom automation equipment from overseas involves more than choosing a machine and comparing quotations. You need to know whether the machine can perform the required production tasks, how its performance will be checked, and what happens after it leaves the supplier’s factory.

These questions are closely connected. A machine may pass a demonstration but fail to meet the agreed production target. A low equipment price may also become less attractive after shipping, export handling and destination charges are included.

For buyers working with an overseas automation manufacturer, three decisions deserve particular attention: defining the machine’s acceptance criteria, choosing the right delivery terms, and confirming who is responsible for each step before shipment.

This guide explains Factory Acceptance Testing (FAT) and four common Incoterms® rules: EXW, FCA, FOB and CIF. More importantly, it shows how to apply them when purchasing custom automation equipment.

Table of contents

Before Comparing Quotations, Define What You Are Buying

What Is FAT and Why Does It Matter?

A Practical FAT Checklist: What Should You Check?

EXW, FCA, FOB and CIF: What Are the Key Differences?

A Buying Example: Why the Lowest Quotation May Not Be the Best Deal

Remote FAT vs. SAT: What Buyers Need to Know

Before Shipment: Five Things to Confirm

Conclusion

1. Before Comparing Quotations, Define What You Are Buying

Imagine that a manufacturer needs a machine to assemble two plastic components. One supplier proposes a semi-automatic station with an operator loading the parts. Another proposes an automatic feeding system with sensors, pneumatic fixtures and automatic unloading.

Both suppliers may describe their products as assembly machines, but the two solutions do not provide the same level of automation. Their prices cannot be compared fairly until their functions and performance requirements are clear.

This is a common challenge with custom automation equipment. Unlike standard products, a custom machine is designed around a particular product, manufacturing process and production target.

Before asking suppliers to quote, clarify the following points:

  • Product requirements: What product or component will the machine handle? Are there different sizes, materials or models?

  • Production process: Which steps should the machine perform automatically, and which steps will still require an operator?

  • Output target: How many products must the machine process within a given period?

  • Quality requirements: What makes a finished product acceptable? Does the machine need to detect defects or record inspection results?

  • Factory conditions: What space, power supply, compressed air and connections to other equipment are available?

You may not have every answer at the beginning. Product samples, photos of the current process and a description of the production problem can still help a manufacturer understand the project.

For example, a customer who says, “We need a machine like this,” and provides a reference photo has given a starting point, not a complete specification. The supplier still needs to understand the product, the required process and the expected result before proposing a suitable design.

This is why two quotations for apparently similar machines can differ substantially. One may include automatic feeding, product detection and reject handling, while another may cover only the main assembly operation.

When reviewing a quotation, compare the actual functions and deliverables rather than the machine names alone. JOIN Industrial’s custom automation equipment solutions provide a starting point for understanding the range of projects that can be developed around specific manufacturing requirements.

Once the machine’s functions are clear, the next question is how to prove that the finished equipment meets those requirements.

Machine operation display screen

2. What Is FAT and Why Does It Matter?

Factory Acceptance Testing (FAT) is a process used to check custom automation equipment at the supplier’s factory before shipment. It helps the buyer confirm whether the machine meets the agreed requirements before it is delivered.

For custom automation equipment, FAT is more than a simple demonstration that the machine can run. The machine needs to perform the tasks it was designed for, under agreed test conditions.

For example, suppose a manufacturer orders a machine to assemble two plastic components. During FAT, the buyer may want to confirm that the machine can assemble the parts correctly, meet the agreed cycle time, and identify specified defects if an inspection function is included.

These requirements should be agreed upon before testing begins. Otherwise, the supplier and buyer may have different ideas about what counts as a successful result.

Agree on the Acceptance Criteria Before Testing

Before FAT, the buyer and supplier should agree on the test scope, product samples, operating conditions and performance targets.

The criteria depend on the machine. A simple fixture may need only a few functional checks, while a more complex automated station may require repeated production trials and inspection records.

There is no single cycle time, sample quantity or test duration that suits every machine. The requirements should reflect the actual application and be documented in the purchase agreement or an agreed FAT plan.

What If the Machine Fails a Test?

If a test does not meet the agreed requirement, the result should be recorded and the cause investigated. The supplier may need to adjust a fixture, reposition a sensor, modify the control program or repeat the test.

The buyer and supplier should also agree on how unresolved issues will be handled. Some issues may need to be corrected before shipment, while others may be managed through a documented corrective-action plan if the contract allows it.

A written FAT report provides a record of what was tested, which requirements were met and which issues remain open. This is more useful than relying only on a general statement that the machine has passed inspection.

The International Electrotechnical Commission publishes IEC 62381:2024, which addresses FAT, site acceptance testing and related integration tests for automation systems in the process industry. Its scope is specific to that industry, so it should not be treated as a universal testing standard for every custom automation machine.

Ultimately, FAT helps both parties establish whether the equipment meets the agreed requirements before shipment. The next step is to turn those requirements into a practical checklist.

                                                    An acceptance inspection checklist

3. A Practical FAT Checklist: What Should You Check?

A FAT checklist helps the buyer confirm whether the machine meets the agreed requirements. Instead of simply watching the machine run, both parties should check specific functions and record the results.

The checklist below is a starting point. The actual tests should depend on the machine’s design, intended use and purchase agreement.

Test area What should you check?
Machine configuration Does the machine match the agreed design and scope of supply?
Product compatibility Can it handle the required product models and sizes?
Operating sequence Does it complete each production step in the correct order?
Cycle time Does it meet the agreed production target under the specified test conditions?
Product quality Do the processed or assembled products meet the agreed quality requirements?
Inspection function If included, can the system detect the specified defects?
Controls and sensors Do the sensors, actuators, alarms and HMI functions work as intended?
Safety functions Do the specified guards, interlocks and emergency stops work correctly?
Maintenance access Can operators and maintenance staff reach the parts that need regular inspection or servicing?
Documentation Are the agreed manuals, drawings and maintenance documents available?

Test With the Right Product Samples

The samples used during FAT matter. A machine may work well with one product but struggle with another size, shape or material.

For example, suppose an assembly machine is designed to process three product models. If FAT only tests one model, the results do not prove that the machine can handle all three.

Before testing, the buyer and supplier should agree on which product samples and variations will be used. If changing models requires different fixtures, settings or adjustments, those operations should also be considered.

For machines with vision inspection or defect detection, the parties should agree on representative acceptable and defective samples. This makes it easier to determine whether the system can identify the defects it is designed to detect.

Record Test Results and Outstanding Issues

A FAT checklist is most useful when it records evidence, not just opinions. For each test, document the expected result, the actual result, the pass/fail status and any follow-up action required.

Photos and videos can help document machine operation, especially when the buyer cannot attend in person. However, video alone may not be enough to verify precise measurements, cycle-time performance or results that require repeated trials.

If a test fails, record the issue and agree on the next step. Depending on the problem and the contract, the supplier may need to make adjustments and repeat the test before shipment.

It is also important to identify any unresolved issues in the FAT report. If a key function has not passed, both parties should clarify whether shipment must be delayed or whether a documented corrective-action plan is acceptable under the contract.

A clear checklist and test report give the buyer and supplier a shared record of the machine’s condition before shipment. Once the technical requirements are clear, the next question is how the equipment will be delivered and which party will bear the related costs and risks.

4. EXW, FCA, FOB and CIF: What Are the Key Differences?

EXW, FCA, FOB and CIF are four trade terms defined under the International Chamber of Commerce’s Incoterms® rules. They clarify the seller’s and buyer’s responsibilities for delivery, costs and the transfer of risk.

These terms do not automatically include machine installation, commissioning or operator training. Such services should be specified separately in the contract.

The explanations below follow Incoterms® 2020. When agreeing on a delivery term, always name the specific place or port and state the version used.

EXW — Ex Works

Under EXW, the seller makes the machine available to the buyer at the agreed place, often the seller’s factory. The seller generally does not have to load the machine onto the collecting vehicle or clear it for export.

The buyer is responsible for arranging collection and the subsequent transport, including export formalities under the EXW rule.

For example, a Chinese supplier quotes a custom automation machine on an EXW basis. The buyer may need to arrange factory collection, loading, export clearance and international shipping through its own logistics provider.

EXW can suit buyers with local logistics support in the supplier’s country. However, export clearance can be difficult for overseas buyers to manage themselves. Before choosing EXW, confirm who will handle loading and export procedures in practice.

FCA — Free Carrier

Under FCA, the seller delivers the machine to the buyer’s nominated carrier or another nominated party at the agreed place. The seller is also responsible for export clearance.

The delivery arrangements depend on the named place:

  • At the seller’s premises: The seller delivers the goods once they have been loaded onto the transport arranged by the buyer.

  • At another agreed location: The seller transports the goods to that location. Delivery takes place when the goods are ready for unloading from the seller’s vehicle and placed at the disposal of the buyer’s nominated carrier or party, in accordance with the rule.

For example, the buyer appoints a freight forwarder to manage international shipping. The supplier packs the machine, completes export clearance and hands it over at the agreed location. The buyer then arranges the main transport.

FCA can be a practical choice when the buyer wants to control international shipping but needs the seller to handle export clearance. It can be used for different modes of transport, including road, rail, air and sea.

FOB — Free On Board

FOB is intended for sea and inland waterway transport. Under FOB, the seller delivers the machine when it is loaded on board the vessel nominated by the buyer at the named port of shipment. The risk transfers to the buyer at that point.

The buyer generally arranges and pays for the main sea freight.

For example, if the contract specifies FOB at a named port, the supplier is responsible for delivering the machine on board the nominated vessel. Once the machine is on board, the buyer bears the risk of loss or damage during the subsequent transport.

One important detail: FOB is not always the best choice for containerized equipment. If the supplier hands a container to the carrier at a terminal before it is loaded onto the vessel, FCA may better reflect the actual delivery arrangement.

CIF — Cost, Insurance and Freight

CIF is also intended for sea and inland waterway transport. Under CIF, the seller arranges and pays for transport to the named destination port and obtains the insurance required by the rule.

However, paying for transport to the destination port does not mean the seller bears the risk throughout the journey. Risk transfers to the buyer when the goods are loaded on board the vessel at the port of shipment, just as it does under FOB.

For example, a supplier quotes a machine on a CIF basis to the buyer’s destination port. The supplier arranges and pays for the sea freight and obtains the required insurance. Nevertheless, the buyer assumes the transport risk once the machine is on board at the shipment port.

Under Incoterms® 2020, CIF generally requires only minimum insurance cover unless the parties agree otherwise. Buyers should check the insurance terms and consider whether additional cover is needed for valuable or sensitive equipment.

EXW vs. FCA vs. FOB vs. CIF: A Quick Comparison

Term Who arranges main transport? Who handles export clearance? When does risk transfer?
EXW Buyer Buyer When the goods are placed at the buyer’s disposal at the agreed place, before loading
FCA Buyer Seller When delivery to the nominated carrier or party is completed at the agreed place
FOB Buyer Seller When the goods are loaded on board the vessel at the shipment port
CIF Seller pays for sea freight to the destination port Seller When the goods are loaded on board the vessel at the shipment port

Note: This table summarizes the general rules under Incoterms® 2020. The precise responsibilities depend on the named place or port and the agreed contract.

Which Term Should You Choose?

There is no single best option for every custom automation project. The right choice depends on the buyer’s logistics capabilities, the shipping method and the services included in the quotation.

  • Consider EXW if you have reliable local support to arrange collection, loading and export procedures.

  • Consider FCA if you want to choose your freight forwarder while having the supplier handle export clearance.

  • Consider FOB for suitable sea shipments where delivery takes place on board the vessel.

  • Consider CIF if you want the seller to arrange and pay for sea freight and the required insurance to the named destination port.

Before signing the contract, confirm the exact named place or port, the applicable Incoterms® version, and any services that fall outside the chosen rule.

For the official definitions and detailed rules, refer to the International Chamber of Commerce’s Incoterms® 2020 guidance.

Once you understand these differences, you can compare supplier quotations more fairly. The next section looks at how two apparently similar offers can lead to different overall purchasing costs.

Loading or unloading cargo from a truck

5. A Buying Example: Why the Lowest Quotation May Not Be the Best Deal

When comparing quotations for custom automation equipment, the lowest price may not represent the lowest overall purchasing cost.

Different suppliers may include different services in their quotations. One price may cover only the machine and basic packaging, while another may also include export handling, shipping arrangements, installation support or operator training.

Consider the following example.

A manufacturer is comparing two quotations for a custom assembly machine. Both suppliers claim that their equipment can perform the required assembly process, but their quotations cover different items.

Cost item Supplier A Supplier B
Machine price Lower Higher
Export handling Not included Included
International freight Arranged by buyer Included in quotation
Installation support Not included Included as agreed
Operator training Quoted separately Included as agreed

Illustrative example only. This table does not represent actual supplier quotations or market prices.

At first glance, Supplier A appears to offer the better deal. However, the buyer still needs to calculate the additional costs of export handling, freight, installation support and training.

Supplier B may offer better overall value if its higher price includes services the buyer would otherwise need to purchase separately. The result depends on the actual quotations and the buyer’s requirements.

Compare the Same Scope of Supply

Before comparing prices, confirm that both suppliers are quoting for the same machine functions and deliverables.

For example, check whether both quotations include:

  • The same production capacity and target cycle time

  • The same product models, fixtures and tooling

  • The same inspection functions and safety features

  • The same spare parts and technical documentation

  • The same testing and acceptance requirements

If one machine includes automatic feeding and defect detection while another performs only the main assembly operation, the two prices are not directly comparable.

Check Delivery and Additional Costs

Next, review the delivery terms and identify which costs are included or excluded.

Confirm the agreed Incoterms® rule and named place or port, then check who is responsible for collection, export clearance, international freight, insurance and destination handling. Also ask whether import duties, taxes, unloading and local transportation are included or charged separately.

Installation, commissioning and training deserve particular attention. For overseas projects, travel expenses, accommodation and on-site engineering support may add to the total cost if they are not included in the original quotation.

A simple way to compare offers is to calculate the expected cost of getting each machine to the required stage of use:

Total expected cost = Machine price + Additional logistics costs + Installation and startup costs + Other project-specific expenses

This is a planning formula rather than an accounting standard. Include only the costs relevant to your project, and avoid counting an item twice if it is already covered by the supplier’s price.

The goal is not simply to find the cheapest machine. It is to understand what each supplier is offering, what you will need to pay separately, and whether the equipment meets your production requirements.

Once the technical scope and expected costs are clear, the next question is how to verify the machine if you cannot visit the supplier’s factory in person.

6. Remote FAT vs. SAT: What Buyers Need to Know

Comparison Chart of FAT and SAT Processes

For overseas buyers, visiting a supplier’s factory for FAT may involve significant travel time and expense. If an on-site visit is not practical, remote FAT can be an alternative.

During a remote FAT, the supplier uses a live video call, recorded footage or other agreed methods to demonstrate the machine’s operation. The buyer can observe the tests, ask questions and review the results without travelling to the factory.

However, remote FAT should be planned carefully. A video showing the machine running is not enough to prove that it meets every performance requirement.

How to Make Remote FAT More Effective

Before the test, agree on the test procedure, product samples and acceptance criteria. Both parties should also confirm how results will be recorded and how any failed tests will be handled.

During the session, the buyer can ask the supplier to:

  • Show the machine’s overall configuration and key components.

  • Run the agreed production sequence using the specified product samples.

  • Demonstrate relevant functions, alarms and safety features.

  • Show cycle-time measurements or other performance results using the agreed method.

  • Record any issues that need correction or further testing.

For important measurements or repeated production trials, live video may not provide enough evidence on its own. Additional test records, measurement data or an agreed retest may be necessary.

It is also useful to agree on how the buyer can ask for an additional demonstration if a result is unclear. This helps make the process more transparent and reduces the risk of relying on selected footage alone.

Remote FAT vs. SAT: What Is the Difference?

FAT and Site Acceptance Testing (SAT) take place at different stages of a project and serve different purposes.

Item FAT SAT
Where it takes place Supplier’s factory Buyer’s installation site
When it takes place Before shipment After delivery and installation, when included in the project
Main purpose Check the machine against agreed requirements before shipment Check the equipment under the actual site conditions
Typical focus Machine functions, production sequence and agreed performance tests Installation, utility connections, integration with other equipment and operation on site

A machine may pass FAT but still need adjustments after installation. For example, the buyer’s factory may have different power or compressed-air conditions, or the machine may need to connect with existing production equipment.

For this reason, buyers should confirm whether SAT, installation, commissioning and operator training are included in the contract. They should also clarify who will provide on-site support and whether travel and accommodation expenses are included.

Remote FAT can help buyers verify a machine before shipment, while SAT can confirm how the equipment performs in its intended working environment. Neither should be assumed to be included automatically; the scope and responsibilities should be agreed upon in advance.

With the acceptance process and delivery arrangements clarified, buyers can make one final check before shipment: confirming that the machine, shipping documents and responsibilities are all ready.

7. Before Shipment: Five Things to Confirm

Workers are preparing to load and unload goods using a cart.

Once FAT is complete, the next step is to prepare the equipment for shipment. Before the machine leaves the supplier’s factory, confirm the following five points to reduce the risk of delays, unexpected costs and misunderstandings.

1. FAT Results and Outstanding Issues

Review the FAT report and confirm whether the machine has met the agreed acceptance criteria.

If any tests have failed or remain incomplete, ask the supplier to document the issue, the corrective action and whether another test is required. Confirm whether the contract allows shipment before all outstanding issues are resolved.

Do not rely solely on a verbal statement that the machine is ready. Keep a written record of the acceptance status.

2. Packing, Dimensions and Weight

Ask the supplier to confirm the final packing arrangement, package dimensions and gross weight.

Custom automation equipment may include a machine frame, control cabinet, fixtures, spare parts and accessories. Some items may need to be packed separately for safe transport.

Also confirm how the equipment will be protected against moisture, impact and handling damage during the planned journey. The packing method should suit the equipment and shipping conditions.

3. Delivery Terms and Shipping Responsibilities

Check that the purchase contract specifies the agreed Incoterms® rule, named place or port, and version.

For example, the contract might state “FCA [named place], Incoterms® 2020” or “CIF [named destination port], Incoterms® 2020,” where appropriate.

Confirm who will arrange collection, loading, export clearance, international freight and insurance. Also clarify which destination charges or local transport costs are not included in the quotation.

This helps prevent disputes caused by different assumptions about what the agreed delivery term covers.

4. Shipping Documents

Confirm which documents are required for the shipment and destination. Depending on the transaction, these may include:

  • Commercial invoice

  • Packing list

  • Transport document

  • Applicable customs or product-related documents

Check that the goods description, quantities, package details and other relevant information are consistent across the documents.

Requirements vary by destination and shipment. Your freight forwarder or customs broker can help confirm which documents are needed for the specific equipment.

5. Installation and Startup Arrangements

Shipping the machine does not necessarily mean it is ready for production. Before dispatch, confirm who will handle unloading, installation, utility connections, commissioning and operator training.

If the supplier will provide remote support rather than send an engineer on site, ask which manuals, electrical drawings, operating instructions and troubleshooting information will be supplied.

Also clarify whether installation or startup support is included in the quotation and who will cover any additional travel or service costs.

These arrangements are easier to resolve before shipment than after the machine arrives at the buyer’s factory.

Conclusion

Buying custom automation equipment from overseas involves many details, but they do not have to make the process complicated. The key is to discuss the important questions before the machine is built and shipped.

Make sure you and your supplier agree on what the machine needs to do, how its performance will be checked, and what each party is responsible for during delivery and installation. FAT helps you verify the machine before shipment, while the right Incoterms® rule helps clarify the delivery arrangements. Neither replaces a clear agreement between buyer and supplier.

Every custom automation project has different requirements. Before requesting a quotation, prepare your product information, production targets and key acceptance criteria, and clarify how the equipment will be shipped. If you are planning a custom automation project, contact JOIN Industrial to discuss your application and equipment requirements.