EXW, FOB, CIF, DDP: which term to buy on when importing from China

EXW — you collect from the factory gate

The factory makes the goods available at its own premises and does nothing else. You arrange collection, export clearance, freight and everything after.

EXW looks like the cheapest quote because it excludes the most. It is also the term that most often goes wrong for a first-time buyer, because export clearance in China must be done by an entity registered to do it — and that entity is not you.

EXW is a reasonable choice only if you already have an agent in China. Otherwise the cheapest-looking quote is the one you cannot execute.

FOB — the usual default, and why

The seller delivers the goods on board the vessel at a named Chinese port and handles export clearance. Risk passes to you once the goods are loaded.

FOB is the common default because it splits the job at a natural seam: the Chinese side handles the Chinese half, you handle your own. You choose the forwarder, which means you see the freight cost rather than having it buried in a unit price.

The catch is that "FOB Shanghai" from a factory without export registration means someone else is doing the export for them — and that cost is inside your unit price, unlabelled.

FCA — what FOB should usually be for a container

Under FCA the seller clears the goods for export and hands them to the carrier your forwarder nominated — at the container yard, the terminal or the factory. Risk passes at that handover.

For containerised cargo this matches what physically happens. A container is handed to the terminal days before it is loaded, and under FOB the factory formally carries the risk through a stretch it no longer controls. The ICC recommends FCA rather than FOB for containers, and rather than EXW whenever the buyer cannot clear export on their own.

If you pay by letter of credit, Incoterms 2020 lets the parties agree under FCA that the carrier issues an on-board bill of lading to the seller — which closes the practical gap that used to keep banks on FOB.

Most Chinese suppliers quote FOB out of habit. For a container, asking for FCA at the same named place costs nothing and puts the risk where the cargo actually is.

CIF and DDP — convenience with a blind spot

Under CIF the seller arranges and pays for freight and insurance to your named port. Convenient, but you no longer see what the freight actually cost, and you have no relationship with the carrier when a container is delayed.

DDP goes furthest: the seller delivers to your door, duties paid. For a small first order this can be genuinely sensible. For a repeating order it is expensive and opaque, and DDP arrangements sometimes rely on customs treatment at the destination that you would not choose if you could see it.

The more the seller handles, the less of your own cost structure you can see. That is the real trade, not the price.

A practical rule

First order, small value, no infrastructure: DDP or CIF, and accept the premium for simplicity.

Repeating orders, or anything above a few thousand dollars: FCA (or FOB, which suppliers quote by habit) with your own forwarder, so freight is a line you control and can tender.

Multiple suppliers into one shipment: FCA or EXW with a consolidating agent, which is the only arrangement that lets several factories feed one container.