Incoterms (International Commercial Terms) define exactly where the seller's responsibility ends and the buyer's begins — who pays freight, who clears customs, who carries the risk if the cargo is damaged in transit. Choosing the wrong one is one of the most common and expensive mistakes a new importer makes. This is the plain-English version of the 11 Incoterms 2020 rules, focused on what actually matters when you buy from China.
The Four You'll Actually Use
| Term | Seller pays until | Who clears import & pays duty | Best for |
|---|---|---|---|
| EXW (Ex Works) | Factory door only | Buyer (everything) | Buyers with a strong forwarder |
| FOB (Free On Board) | Loaded on vessel at China port | Buyer | Most ocean shipments — the standard |
| CIF (Cost, Insurance, Freight) | Destination port (incl. insurance) | Buyer | Buyers who want supplier to arrange sea freight |
| DDP (Delivered Duty Paid) | Buyer's door, duty & tax paid | Seller / forwarder | E-commerce, FBA, hands-off buyers |
EXW: Maximum Control, Maximum Work
Under EXW the supplier just makes goods available at their factory. You (or your forwarder) handle export clearance, origin trucking, freight and everything after. It gives you full visibility into real costs but you need a capable China-side forwarder — export clearance under EXW can be awkward because the supplier isn't the exporter of record.
FOB: The Sensible Default for Ocean
FOB is the workhorse term. Your supplier handles export clearance and gets the goods loaded onto the vessel; you control the main freight leg and destination. It cleanly splits cost and risk at the origin port and is what most experienced importers buy on. Pair it with your own forwarder for the best rates.
CIF: Convenient but Watch the Markup
With CIF the supplier arranges and pays sea freight and insurance to the destination port. Convenient for beginners, but suppliers often mark up freight or route through their preferred (not cheapest) forwarder, and you lose control of the carrier. You still handle import clearance and duty.
DDP: Hands-Off, One Price
DDP puts everything on the seller/forwarder — including destination customs, duty and tax. It's ideal for e-commerce and Amazon FBA where you want one number and no border surprises. The trade-off is you must trust the quote is genuinely all-in (see our DDP vs DDU comparison).
Who Carries the Risk?
Incoterms set the risk transfer point, not just who pays. Under FOB, risk passes to you once goods are on the vessel — if the ship has a problem, it's your cargo. This is exactly why cargo insurance matters: carrier liability is tiny, and your insurable interest begins at the risk-transfer point your Incoterm defines.
A Simple Decision Guide
- You have a good forwarder and want lowest cost → FOB (or EXW for full control).
- You're new and want the supplier to ship to port → CIF, but compare the freight markup.
- You want zero hassle, one price, no customer duty bills → DDP.
- Never agree a term you don't understand — clarify in the PO who clears import and pays duty.
Bottom Line
For 90% of China imports the choice is FOB (you control freight) or DDP (forwarder controls everything). Match the term to how much of the logistics you want to own. Tell us your buying terms and we'll structure the cleanest, cheapest route — get a quote.
Sammi Ding
Has handled 500+ shipments from China to Australia, US and Europe. Based in our Shenzhen office, available on WhatsApp at +86 136 8628 7742.