Key takeaways
- Incoterms answer exactly two questions: who pays for each leg of the journey, and where the risk of loss transfers from seller to buyer.
- EXW makes you, the foreign buyer, the de-facto exporter in China — someone has to clear Chinese customs, and if the factory offers to do it “their way” on your EXW order, that is a grey-market tell.
- FOB is my default for first orders: the factory handles export, you control ocean freight through your own forwarder, and every cost line stays visible.
- CIF looks convenient until destination port charges arrive. The factory books the cheapest freight, not the best.
- DDP is the one term I won’t accept on a first order — not because it’s bad, but because a single all-in price hides the entire compliance chain.
Two letters on a proforma invoice decide who eats the loss when a forklift drops your carton in Ningbo. Not the contract’s fine print. Not your relationship with the factory. The Incoterm.
Most first-time importers pick theirs the way the factory suggests it — which means the factory picked it. Here is how I read EXW, FOB, CIF and DDP on China orders, where the risk actually sits under each, and the one term I refuse until a relationship has earned it.
The only two questions Incoterms answer
Forget the eleven terms for a second. Every Incoterm is just an answer to two questions:
- Who pays for each leg — the truck, the export customs, the ocean freight, the insurance, the destination charges, the duties, the final delivery.
- Where the risk transfers — at which physical point a damaged carton becomes your problem instead of the factory’s.
A China shipment has seven legs: factory floor, truck to port, Chinese export customs, loading on the vessel, ocean freight, destination port and duties, final delivery. Each term draws a different line across those seven legs.
| Leg | EXW | FOB | CIF | DDP |
|---|---|---|---|---|
| Factory → China port truck | Buyer | Seller | Seller | Seller |
| China export customs | Buyer* | Seller | Seller | Seller |
| Ocean freight | Buyer | Buyer | Seller | Seller |
| Insurance | Buyer | Buyer | Seller (minimum cover) | Seller |
| Destination port charges | Buyer | Buyer | Buyer | Seller |
| Import duties & customs | Buyer | Buyer | Buyer | Seller |
| Final delivery | Buyer | Buyer | Buyer | Seller |
*That asterisk is the whole story of EXW. Keep reading.
EXW: the term that secretly makes you a Chinese exporter
EXW (Ex Works) means the factory’s responsibility ends at its floor. Everything after — trucking, export customs, all of it — is yours. And here is the part nobody explains to first-time buyers: Chinese export customs requires a Chinese entity with export rights. You, a foreign company, cannot simply “do” your own export clearance in China.
So on every EXW order, someone is borrowing export paperwork. If your factory or trader offers to “handle customs” on an EXW order, what they are describing is exactly the grey zone I documented in the grey-market case study: goods leaving under paperwork that is not cleanly yours. EXW plus “we handle customs our way” is one of the loudest grey-market tells there is.
EXW has honest uses — mostly when your own forwarder consolidates from several factories and handles export licensing properly. As the default term on a factory quote, it is a trap dressed as a discount.
FOB: my default, and why
FOB (Free on Board) draws the line where it should be drawn for a first order: the factory pays and owns everything up to the goods sitting on the vessel at the named port — FOB Ningbo, FOB Shenzhen — and you own the ocean leg with your own forwarder.
- Visibility. Ocean freight is quoted to you directly by your forwarder. You see the real number, not a number baked into the factory’s margin.
- Control. Your forwarder works for you. When a vessel rolls or a container sits, someone on your side is making calls.
- A clean risk line. Goods on board, risk transfers. Simple to insure, simple to document, simple to argue about if it ever comes to that.
It is also the term that makes quote comparisons honest — I force every RFQ onto FOB so the spreadsheets line up, as written up in the RFQ comparison guide.
CIF: the convenience that bills you at the destination
CIF (Cost, Insurance & Freight) means the factory books and pays the ocean freight and minimum insurance to your port. It feels like less work. It is not less cost.
The factory chooses the freight — and the factory chooses the cheapest freight, because it is their line item. Slow transshipments, crowded sailings. Then the arrival: destination port local charges that nobody quoted you, because under CIF those are yours. I have watched a CIF “saving” of $200 turn into $600 of destination charges and a transit two weeks longer than the FOB option would have been.
DDP: the all-in price that hides everything
DDP (Delivered Duty Paid) is the factory’s door to your door, duties included. For an Amazon seller moving small repeat volumes through a trusted chain, it is genuinely great — one invoice, zero logistics headaches.
On a first order, I refuse it. Not because DDP is dishonest by nature, but because a single all-in price is a black box: you cannot see the freight, you cannot see the customs valuation, you cannot see who is importer of record at your end. When the valuation is kept low to make the DDP price attractive, the customs risk at destination is still yours to discover — later, audited, in your name. DDP hides every line item I want visible on order number one. Once a relationship has earned trust and the paperwork is transparent, DDP becomes a tool again.
The first-order rule
FOB at a named port. Your own forwarder. Payment 30/70 tied to a pre-shipment inspection. Specs stamped before bulk. Four decisions that keep every cost line and every risk line visible while you are still learning who your factory is. Everything else — CIF for convenience on repeat lanes, DDP for small FBA replenishments — is a later conversation.
Quick answers
Is DDP shipping from China safe?
Safe with a trusted partner and transparent paperwork. Risky as a first-order term, because the all-in price hides freight, valuation and importer-of-record decisions that can surface later as customs problems in your name.
Who pays import duties under FOB?
You do. FOB covers the factory’s costs up to the vessel at the Chinese port; destination duties, port charges and final delivery sit on the buyer’s side.
Why is EXW cheaper than FOB?
Because the factory removed its export costs from the price — and handed you a compliance problem instead. Add trucking, export licensing and customs brokerage to the EXW number before you compare anything.
Terms are only as good as the inspection behind them — the payment-and-QC pairing lives in the RFQ guide. Questions about your lane? Ask before you sign the PI.
Founder & Sourcing Director at Clari Sourcing, based in Guangzhou. 10+ years of factory sourcing, negotiation and quality control experience, helping importers and Amazon sellers buy from China with confidence.