What are Incoterms?
Incoterms (International Commercial Terms) are standardized trade terms that define:
- Who pays for shipping
- Who handles insurance
- Where risk transfers from seller to buyer
- Who clears customs
Understanding these terms is essential for accurate pricing and avoiding disputes.
Common Incoterms for China Imports
EXW (Ex Works)
Meaning: Buyer collects from seller's premises
Seller responsibilities: Make goods available for pickup
Buyer responsibilities: Everything else - pickup, export customs, shipping, import customs
Use when: You have your own logistics in China
FOB (Free On Board)
Meaning: Seller delivers goods onto the vessel at port
Seller responsibilities: Goods to port, export customs, loading onto ship
Buyer responsibilities: Freight, insurance, import customs
Most common term for China imports. You control shipping costs.
CIF (Cost, Insurance, Freight)
Meaning: Seller pays for freight and insurance to destination port
Seller responsibilities: Goods, freight, insurance to destination port
Buyer responsibilities: Import customs, delivery from port
Note: Insurance is minimal. Risk transfers at origin, not destination.
DDP (Delivered Duty Paid)
Meaning: Seller delivers to buyer's door with all duties paid
Seller responsibilities: Everything including import customs and duties
Buyer responsibilities: Just receive the goods
Simplest for buyers but often more expensive.
Comparison Table
| Cost/Risk | EXW | FOB | CIF | DDP |
|---|---|---|---|---|
| Export customs | Buyer | Seller | Seller | Seller |
| Origin freight | Buyer | Seller | Seller | Seller |
| International freight | Buyer | Buyer | Seller | Seller |
| Insurance | Buyer | Buyer | Seller | Seller |
| Import customs | Buyer | Buyer | Buyer | Seller |
| Import duties | Buyer | Buyer | Buyer | Seller |
| Destination delivery | Buyer | Buyer | Buyer | Seller |
Which to Choose?
- FOB - Best for most importers. Control over shipping, competitive rates
- DDP - Best for simplicity. Higher cost but no surprises
- CIF - Avoid unless required. Seller's insurance is minimal
- EXW - Only if you have China logistics capability
Want hassle-free DDP shipping? Get a quote for all-inclusive delivery.