Incoterms explained simply: they are standard trade terms that define who is responsible for what when goods move from seller to buyer. When you buy from a Chinese supplier, the Incoterm on your quote decides who arranges transport, who pays for each part of the journey, who handles export and import formalities, and at which point the risk of loss or damage passes to you. Two quotes for the same product can look very different just because they use different Incoterms. This guide explains the terms buyers see most often when importing from China: EXW, FOB, CIF and DDP.
What Incoterms are
Incoterms are rules published by the International Chamber of Commerce (ICC). They are revised from time to time, so a contract should state which edition it refers to, for example “FOB Ningbo, Incoterms 2020”.
Each Incoterm answers three questions:
- Costs: who pays for transport, loading, insurance, export and import formalities.
- Risk: at which point responsibility for loss or damage passes from seller to buyer.
- Tasks: who arranges transport, documents and customs procedures.
What Incoterms do not cover is just as important. They do not set the price, the payment terms, the transfer of ownership or what happens if the goods are defective. Those belong in your purchase contract.
Some Incoterms can be used for any mode of transport, including air, rail and road. Others, such as FOB and CIF, are intended for sea and inland waterway transport.
The four Incoterms buyers see most
When importing from China, most quotes use one of four terms. They range from the seller doing the least (EXW) to the seller doing the most (DDP).
EXW: Ex Works
Under EXW, the seller makes the goods available at its own premises, such as the factory or warehouse. From there, the buyer is responsible for almost everything: loading, transport, export clearance in China, international freight, import clearance and delivery.
Good to know:
- EXW gives the seller the least responsibility and the buyer the most.
- Export clearance in China is formally the buyer’s task under EXW, which can be difficult without a local partner or forwarder.
- EXW is often used for samples, small orders or when the buyer’s forwarder collects from several suppliers for consolidation.
FOB: Free On Board
Under FOB, the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment in China, and handles export clearance. The buyer arranges and pays for the main sea freight, insurance, import clearance and delivery.
Good to know:
- FOB is one of the most common terms for sea shipments from China.
- It gives the buyer control over the choice of freight forwarder and shipping line.
- Risk passes when the goods are on board the vessel at the port of shipment.
- FOB is intended for sea and inland waterway transport. For containers handed over at a terminal, or for air, rail and road, FCA is often the more suitable term.
CIF: Cost, Insurance and Freight
Under CIF, the seller arranges and pays for the sea freight to the named port of destination and buys minimum insurance cover for the buyer. However, the risk passes to the buyer when the goods are on board the vessel in China, not when they arrive.
Good to know:
- CIF can look convenient, because the quote includes freight to your port.
- The buyer still pays destination port charges, import duties, taxes and delivery.
- The insurance is often minimum cover; check whether it is enough for your goods.
- You do not choose the shipping line or forwarder, which can mean less visibility and unexpected local charges at destination.
- CIF is intended for sea and inland waterway transport. For other modes, CIP is the comparable term.
DDP: Delivered Duty Paid
Under DDP, the seller delivers the goods to the named place in the buyer’s country, cleared for import, with duties and taxes paid. The seller takes on the most responsibility of any Incoterm.
Good to know:
- DDP is simple for the buyer on paper: one price to the named place.
- The seller, or its logistics provider, must be able to act as importer or handle import clearance in your country, which is not always possible or legal for a foreign seller.
- You have less visibility of how the goods are declared, yet incorrect declarations can still create problems for the receiving party.
- Ask what exactly is included and who will be named in the import documents.
Comparison table
| Incoterm | Seller delivers at | Main freight paid by | Risk passes to buyer | Export clearance | Import clearance |
|---|---|---|---|---|---|
| EXW | Seller’s premises | Buyer | At seller’s premises | Buyer | Buyer |
| FOB | On board vessel, port of shipment | Buyer | On board at port of shipment | Seller | Buyer |
| CIF | On board vessel, port of shipment | Seller (to destination port) | On board at port of shipment | Seller | Buyer |
| DDP | Named place in buyer’s country | Seller | At named place | Seller | Seller |
How to choose an Incoterm when buying from China
There is no single best term. Some practical guidance:
- If you have a trusted freight forwarder, FOB (for sea) or FCA gives you control over transport and costs from China onwards.
- If you buy from several suppliers and consolidate, EXW or FCA to a warehouse in China, with a forwarder or sourcing partner collecting, is a common setup.
- If you are new and want simplicity, CIF or DDP can look attractive, but compare the full landed cost and understand what is not included.
- Always compare quotes on the same Incoterm. An EXW price and a CIF price for the same product are not directly comparable.
The Incoterm also affects which documents the seller provides. Our article on import customs from China covers the main documents, and our guide to shipping from China compares transport methods.
Customs requirements differ by country. For details, contact our team in China.
How TOPDANBAZ helps
Our team in Yiwu helps buyers agree clear terms with suppliers through price and terms negotiation, including the Incoterm and the named place. We coordinate the handover from suppliers to freight forwarders through logistics coordination, including consolidation of goods from several suppliers. See how the process works on our how it works page.
FAQ
Which Incoterm is most common for imports from China?
FOB is widely used for sea shipments, and EXW is common for small orders and consolidation. The right choice depends on your shipment and your forwarder.
Does CIF mean the seller is responsible until the goods arrive?
No. Under CIF the seller pays freight and minimum insurance to the destination port, but the risk passes to the buyer once the goods are on board in China.
Is DDP the safest option for a first order?
Not necessarily. It is simple on paper, but you have less control over transport and declaration. Understand what is included before choosing it.
Do Incoterms decide when I pay?
No. Payment terms are separate and must be agreed in the contract.
If you want help agreeing clear terms for your next order, send us a product request and our team in China will come back to you.
