FOB vs EXW vs CIF vs DDP: Incoterms Explained

If you’re importing from China, understanding shipping terms (Incoterms) is critical.

These terms define:

• Who pays for shipping

• Who handles customs

• When risk transfers

If you choose the wrong term, you may face unexpected costs or risks.

Let’s break down the most common Incoterms in simple terms.

EXW (Ex Works) – Maximum Responsibility for Buyer

Meaning: The supplier only prepares the goods at the factory.

You are responsible for:

• Pickup from factory

• Export customs clearance

• Shipping

• Import duties

👉 Best for experienced buyers with their own logistics team

👉 Not recommended for beginners

FOB (Free On Board) – Most Common Option

Meaning: Supplier loads goods onto the ship.

After goods are on board:

• Risk transfers to you

• You handle shipping and insurance

👉 Balanced option

👉 Widely used in sea freight

FCA (Free Carrier) – Flexible for Air & Sea

Meaning: Supplier delivers goods to your carrier.

After handover:

• Risk transfers to buyer

• Shipping is your responsibility

👉 Good for air freight

👉 More flexible than FOB

CFR (Cost and Freight) – Supplier Pays Shipping

Meaning: Supplier pays for shipping to your port.

However:

• Risk transfers once goods leave China

• You handle insurance and import

👉 Lower upfront cost

👉 Higher risk exposure

CIF (Cost, Insurance and Freight)

Meaning: Supplier pays:

• Shipping

• Basic insurance

But:

• Risk still transfers early

• Insurance coverage may be limited

👉 Slightly safer than CFR

👉 Still not fully risk-free

DDP (Delivered Duty Paid) – Easiest for Buyers

Meaning: Supplier handles everything:

• Shipping

• Customs clearance

• Import duties

You just receive the goods.

👉 Best for beginners

👉 Most convenient

👉 Usually the most expensive

Which Incoterm Should You Choose?

If you are a beginner:

👉 Choose DDP (simple and safe)

If you want better cost control:

👉 Choose FOB

If you are experienced:

👉 Use EXW or FCA

Common Mistakes Buyers Make

• Choosing EXW without logistics experience

• Thinking CIF means no risk

• Ignoring insurance coverage

• Not clarifying responsibilities

Final Thoughts

Understanding Incoterms is essential for importing from China.

The right choice can:

• Save you money

• Reduce risk

• Improve delivery efficiency

Need Help with Shipping from China?

If you’re unsure which shipping method is best, working with a sourcing agent can help you choose the right Incoterm and avoid costly mistakes.

I’m Daniel.

Follow me for more China sourcing tips.