Every Incoterm is a single point of transfer. Before that point: the supplier's cost and risk. After it: yours. The negotiation on a proforma invoice is really just one question: where do we draw the line? Three letters on your PI decide who pays when a container gets seized, a forwarder plays with paperwork, or 14% of the goods arrive defective. I've lived the last one. It's a bad way to learn.
| Term | Name | Any transport? | Risk transfers to buyer when... |
|---|---|---|---|
| EXW | Ex Works | Yes | Goods leave the factory gate |
| FCA | Free Carrier | Yes | Handed to your carrier |
| CPT | Carriage Paid To | Yes | First carrier (risk passes earlier) |
| CIP | Carriage & Insurance Paid | Yes | First carrier + insurance included |
| DPU | Delivered at Place Unloaded | Yes | Arrives, unloaded, at destination |
| DAP | Delivered at Place | Yes | Arrives at destination (not unloaded) |
| DDP | Delivered Duty Paid | Yes | Your door, duties paid |
| FAS | Free Alongside Ship | Sea only | Next to the vessel |
| FOB | Free On Board | Sea only | Loaded on the vessel |
| CFR | Cost & Freight | Sea only | On the vessel (no insurance) |
| CIF | Cost, Insurance & Freight | Sea only | On the vessel + minimum insurance |
The supplier's favorite for new buyers. You pay everything: loading, inland transport in China, export clearance, ocean freight, insurance. The trap: the supplier holds zero responsibility after the gate — and many buyers can't even export without the supplier's document cooperation. I lost €40,000 at customs once because the party controlling the paperwork wasn't the party paying the price. Don't learn this the way I did. Never accept EXW on a first order.
The FOB vs EXW debate ends here: FOB is the procurement standard for import from China. The supplier pays until the goods are loaded and handles export clearance. You choose the forwarder and the insurance — and the forwarder choice matters more than the price, because the forwarder controls the paperwork. Keep that control.
Convenient, and sometimes cheaper-looking. But the insurance is minimum coverage — the kind that pays out on nothing — and the seller's forwarder controls the shipment. With 2026 levels of customs scrutiny, the importer of record (you) eats every documentation mistake their agent makes. Their convenience. Your risk.
Sounds perfect. It's the riskiest term in the book: the seller's agent controls the customs declaration, and under-declared values to save duties are endemic in China trade. The fine lands on the importer of record. That's you. DDP is for experienced importers who audit the customs entry — never for beginners, whatever the price looks like.
| Your situation | Term to use | Why |
|---|---|---|
| First order with a new supplier | FOB | Supplier risk until the vessel; you keep freight control |
| Samples or small test shipment | FCA / DAP | Simple handover, no vessel complexity |
| Trusted forwarder network | CIF acceptable | Only with your own insurance on top |
| Tariff-sensitive US category | FOB + compare Vietnam | Keep control; run the landed-cost comparison before choosing the origin |
| Supplier pushing DDP hard | Ask why — then usually walk | Under-declaration risk is priced into their offer |
FOB (Free On Board) — the supplier pays until goods are loaded on the vessel, and you control the freight forwarder and insurance. Recommended for every first order.
EXW means you pay for everything from the factory gate: loading, inland transport, export clearance, ocean freight, insurance. The supplier holds zero responsibility after the gate — and you may not even be able to export without their document cooperation.
No. With DDP, the seller's agent controls the customs declaration; under-declared values are common and the importer of record pays the fines. For experienced importers who audit entries only.
FOB: you choose the forwarder and control the shipment. CIF: the seller delivers to your port but uses their own forwarder and minimum insurance — the paperwork risk stays with you.
Usually yes, in one email. Most factories quote EXW by default and accept FOB without changing the unit price, because FOB is the China export standard. If a supplier refuses, ask why — that conversation is worth having.
We review your PI — Incoterms, payment clauses, quality terms — plus verify the supplier and the real market price. Written report in 48 hours.