Complete Guide to FOB, CIF, EXW and Other Incoterms for China Imports

Importing from China means choosing an Incoterm. The right term saves money. It also prevents confusion at customs, ports, and warehouses. This guide explains the common Incoterms you will meet. It shows who pays, who risks, and who handles customs and insurance. Short. Clear. Practical.

What are Incoterms?

Incoterms are standard trade rules created by the International Chamber of Commerce. They define who is responsible for transport, insurance, export and import duties, and risk at each stage. Think of them as the traffic rules for international shipping. Use the right one and traffic flows. Pick the wrong one and you get jams and extra bills.

How to read this guide

• Each term shows seller vs buyer responsibilities.
• Risk transfer point is highlighted.
• Practical tips help you choose the right term for China imports.

EXW (Ex Works) — Seller’s job ends at the factory

Seller responsibility: Make goods available at their premises.

Buyer responsibility: Everything else — export clearance, inland transport in China, ocean freight, insurance, import clearance, delivery to your warehouse.

Risk transfer: When goods are made available at seller’s location.

When to use: You have a freight forwarder in China. You want full control or lower upfront costs. Often used for small suppliers or samples.

Tip: EXW looks cheap on the invoice. It can be expensive once you add inland pickup, export docs, and export clearance.

FOB (Free On Board) — Classic for sea freight from China

Seller responsibility: Deliver goods onboard the vessel at the named port in China and clear export.

Buyer responsibility: Sea freight, insurance, import clearance, and delivery after the port of departure.

Risk transfer: When goods pass the ship’s rail at the origin port.

When to use: Standard for full container loads (FCL). Shippers and freight forwarders prefer FOB because it splits responsibilities clearly.

Tip: Confirm which China port (e.g., Shanghai, Shenzhen) and who pays terminal handling charges. Ask your supplier to confirm export paperwork.

CIF (Cost, Insurance and Freight) — Seller arranges sea transport and minimal insurance

Seller responsibility: Pay cost and freight to the named destination port. Arrange basic insurance to cover loss or damage during carriage.

Buyer responsibility: Import clearance, duties, and inland delivery from destination port.

Risk transfer: When goods pass the ship’s rail at the origin port, even though seller pays freight to destination.

When to use: Good for new importers who want the seller to handle sea freight booking. Common for small to medium shipments.

Tip: Insurance under CIF is basic. Consider buying extra coverage if your cargo is high value.

CIP and CPT — Carriage with insurance or without

CPT (Carriage Paid To): Seller pays carriage to the named destination but buyer handles insurance and import formalities.

CIP (Carriage and Insurance Paid To): Like CPT, but seller also buys insurance. Under Incoterms 2020, CIP requires higher insurance cover than CIF in many cases.

When to use: Useful for multimodal shipments where sea is mixed with air or road. CIP is better if you want the seller to arrange insurance cover.

DAP and DDP — Door delivery options

DAP (Delivered At Place): Seller delivers goods ready for unloading at the named place. Buyer handles import clearance and duties.

DDP (Delivered Duty Paid): Seller handles everything — transport, import clearance, duties, and delivery to your location.

When to use: DAP for simpler seller responsibility and buyer clearing customs. DDP for near-no-stress delivery. But DDP can be costly and sellers may avoid it if they lack import licenses.

Tip: If your supplier offers DDP, confirm who pays VAT and how customs duties will be handled. Ask for proof of prior DDP shipments.

Common mistakes to avoid

• Assuming seller handles export clearance with EXW. They usually don’t.
• Thinking CIF means you are fully insured. Check policy limits and exclusions.
• Choosing DDP without checking the supplier’s ability to import legally to your country.
• Failing to name exact delivery places or ports. Ambiguity costs money.

Practical decision guide for China imports

• Use EXW only if you have a reliable forwarder in China.
• Use FOB for standard sea freight when you want control over shipping costs and carrier choice.
• Use CIF for convenience if you are new to imports and accept basic insurance.
• Use CIP when you need seller-arranged insurance for multimodal transport.
• Use DDP if you want the seller to handle everything and you can pay a premium.

Customs and documentation — What to watch

Always confirm these documents: commercial invoice, packing list, bill of lading (or AWB), insurance certificate, and export declaration. For China exports, ensure the seller provides accurate HS codes. Wrong codes cause delays and fines. Also, name the Incoterm and the exact place or port in your contract. Precision saves money.

How Supplier Ally (sourcingall.com) helps

Supplier Ally guides you through Incoterm selection. We handle freight quotes, negotiate terms, and arrange inspections. We also coordinate customs clearance and insurance. If you want a head start, we match you with vetted suppliers in China and arrange the right shipping setup for your needs. Think of us as your logistics co‑pilot.

Final tips

• Put the agreed Incoterm and the exact location (e.g., FOB Shanghai Port) in the contract.
• Get quotes from freight forwarders for FOB vs CIF to compare true costs.
• Always check insurance scope and limits on CIF/CIP shipments.
• Ask your supplier for past shipment references when they offer DDP.

Questions about a specific shipment? Visit sourcingall.com or contact Supplier Ally for a free consult. We handle the messy parts so you can focus on sales and growth. And yes, we speak port shorthand.