FOB is the right default for first orders. EXW makes you bleed time on local Chinese processes; CIF/CIP hides the destination leg's cost; DDP outsources both costs and legal liability. Compare quotes by converting every term back to FOB-equivalents.
Why Incoterms Decide Money and Blame
Incoterms are 11 standard three-letter terms in the International Chamber of Commerce catalog that split two questions: who pays for each transport leg, customs step and insurance, and whose risk it is if something is damaged, delayed or seized. Misreading either question is how first orders become volunteer donations.
The four terms below cover over 90% of small-buyer imports; the rest are permutations. Learn these four and you can decode nearly every quote a Chinese supplier sends.
The Four Terms That Matter
| Term | Seller pays | Buyer pays | Risk transfers | Use when |
|---|---|---|---|---|
| EXW Ex Works | Produces the goods at their door | Pickup, export clearance, all freight, insurance | At the factory gate | You have a local agent who eats logistics for breakfast |
| FOB Free on Board | Trucking, export clearance, loading on vessel | Ocean/air freight, insurance, destination costs, duties | On board at origin port | Default for almost all first orders |
| CIF Cost, Insurance, Freight | Freight + minimum insurance to your port | Destination THC, duties, delivery from port | Still on board — but they arranged transport | Air freight small lots; when seller network cheaper |
| DDP Delivered Duty Paid | Everything incl. duties to your door | Basically just receive | At final delivery | Small samples; legal risk stays with seller (why it's rare and pricey) |
Real Order, Same Container, Four Math Routes
Same 1,000-unit order, shipping from Yiwu to Los Angeles. Goods $4,000 (FOB Ningbo). Destination-side extra costs shown so you can compare apples to apples:
| Cost item | EXW | FOB | CIF | DDP |
|---|---|---|---|---|
| Goods invoice | $4,000* | $4,000 | $4,310** | $5,290*** |
| Pickup + export clearance (China) | $180 | paid by seller | paid by seller | paid by seller |
| Ocean freight + insurance | $680 | $712 | paid by seller | paid by seller |
| Destination THC + docs | $290 | $290 | $310 | paid by seller |
| US duties + brokerage | $430 | $430 | $430 | paid by seller |
| Landed total | $5,580 | $5,432 | $5,050 + duty $430 = $5,480 | $5,290 all-in |
*EXW goods price is often quoted lower because seller excludes every service — total landed is what tells the truth. **CIF embeds freight ($310) but charges a "minimum insurance" that covers only the ICC-C level (rarely your real loss). ***DDP embeds duties/brokerage estimate plus a risk premium; quotes rarely itemize it.
Read the table like an importer: FOB shows the cheapest controllable landed cost, CIF looks similar but transfers zero risk earlier, DDP is convenient but rarely cheaper than running the numbers yourself, and EXW only wins with a trusted China-side agent (see our freight forwarder guide).
Two Negotiation Moves These Enable
- Convert every comparison to FOB-equivalents. When you collect 3 quotes with mixed terms, restate them all in FOB + listed freight/duty refs, or the comparison is meaningless.
- Ask who pays destination THC before booking. Under CIF "[destination costs are buyer's]" is the fine print that surprises new importers — budget $280-430 for a standard container into US West Coast ports.
Frequently Asked Questions
Why do suppliers push CIF/DDP on new buyers?
Two reasons, both fine to negotiate through: genuine service (they have freight relationships and consolidate) and margin hiding (freight resale markups of 15-40%). Ask for the freight line itemized and you'll know which motive you're facing.
What is "FCA" — is it different from FOB?
FCA (Free Carrier) is the modern replacement for containerized freight: risk transfers when goods are handed to your nominated carrier, not when they're "on board". For containerized cargo, FCA technically suits better, but FOB remains the commercial habit in China trade.
My supplier quoted EXW — should I refuse?
No, just budget it. EXW + your own forwarder is the most controllable combination once you have one (see how to pick a forwarder). Without a forwarder, accept FOB and skip EXW until you know your local costs.
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