Incoterms
EXW, FOB, CIF and DDP: Incoterms explained for China imports
The Incoterm on your supplier's quote decides who pays for each part of the journey and at what point the goods become your risk. Here's what each common term means when you're buying from China.
- Current version
- Incoterms® 2020
- Most common supplier quote
- FOB or EXW
- Simplest for new importers
- DDP
Updated
What Incoterms decide — and what they don't
Incoterms® are a set of 11 standard trade terms published by the International Chamber of Commerce. The current version is Incoterms 2020. Each term answers two questions:
- Costs: which party pays for each stage — export clearance, freight, insurance, import clearance, duty, delivery.
- Risk: at what point responsibility for loss or damage passes from seller to buyer.
They don't decide the price, the payment terms, or who owns the goods. Those belong in your purchase contract. Always write the term with a named place and the version — for example "FOB Yantian, Incoterms 2020" — because the place matters as much as the term.
The terms you will actually see, compared
| Term | Supplier pays up to | Risk passes to you | Who arranges main freight |
|---|---|---|---|
| EXW — Ex Works | Goods ready at the factory | At the factory | You |
| FCA — Free Carrier | Handing goods to your carrier, export-cleared | At handover to the carrier | You |
| FOB — Free on Board | Goods loaded on the vessel, export-cleared | Once loaded on board in China | You |
| CFR — Cost and Freight | Ocean freight to the US port | Once loaded on board in China | Supplier |
| CIF — Cost, Insurance and Freight | Ocean freight plus minimum insurance | Once loaded on board in China | Supplier |
| DAP — Delivered at Place | Delivery to your address, not cleared for import | At your address | Supplier or forwarder |
| DDP — Delivered Duty Paid | Delivery to your address, cleared and duty paid | At your address | Supplier or forwarder |
FOB, CFR and CIF apply only to sea and inland waterway transport. For air freight and containers handed over at an inland depot, the matching terms are FCA, CPT and CIP.
EXW: cheapest quote, most work for you
Under EXW the supplier only has to make the goods available at its premises. In theory you're responsible even for loading the truck and filing the Chinese export declaration — something a foreign buyer can't easily do.
In practice, EXW quotes from Chinese suppliers work fine as long as your forwarder collects from the factory and handles export clearance. Just confirm that the supplier will provide the documents the export declaration needs, and that it will help load the truck.
FOB: the usual choice for ocean freight
FOB is the most common term in China–US trade, and usually the best balance. The supplier delivers the goods to the port, clears them for export, and pays to load them onto the vessel your forwarder has booked. From there, freight, insurance, US customs and delivery are yours.
FOB keeps you in control of the main freight cost and the choice of carrier, while leaving the China-side logistics with the party best placed to handle them.
CIF and CFR: why a "cheap" freight-included price can cost more
With CIF or CFR, the supplier books the ocean freight. It sounds convenient, but you no longer control which carrier is used or what is charged at destination. The supplier's forwarder often adds destination fees that you discover only when the container arrives — and you can't refuse them without leaving the goods at the port.
CIF insurance is also only the minimum level of cover (Institute Cargo Clauses C), which excludes many common causes of loss. If you buy CIF, consider topping it up with your own cargo insurance.
DDP: one price to your door
Under DDP the seller's side carries every cost and all the risk up to your door, including US import clearance and duty. Few Chinese factories will offer true DDP to the US, so importers usually buy EXW or FOB and have a forwarder provide the DDP service from there. Read how DDP shipping works.
Which term should you ask for?
- Ocean shipments with your own forwarder: FOB.
- Suppliers far from the port, or several suppliers to consolidate: EXW, with your forwarder collecting from each factory.
- Air freight: FCA or EXW.
- You want one fixed landed cost and no customs paperwork: EXW or FOB from the supplier, plus a DDP service from your forwarder.
FAQ
Incoterms explained: common questions
The questions importers ask us before the first booking. If yours is not here, ask us directly — a real coordinator replies, not an auto-responder.
What is the difference between FOB and EXW?
Under EXW you take over at the factory and are responsible for export clearance and getting the goods to the port. Under FOB the supplier handles those and pays to load the goods on the vessel; you take over once they’re on board.
Is CIF or FOB better when buying from China?
FOB usually works out better because you choose the carrier and avoid unexpected destination charges. CIF looks convenient, but you lose control of the freight and often pay more at the US end.
Which Incoterm should I use for air freight?
FCA or EXW. FOB, CFR and CIF are intended for sea freight only.
Does FOB include export customs clearance?
Yes. Under FOB the seller clears the goods for export. Under EXW, the buyer is technically responsible for it.
Are Incoterms legally binding?
They become binding when you include them in your contract. State the term, the named place and the version, for example “FOB Ningbo, Incoterms 2020”.