Two suppliers can quote the same product at $4.20 and $5.60 and both be telling the truth — because they are quoting different Incoterms. Before you compare prices, you have to know who pays for what between the factory gate and your warehouse.
1. What an Incoterm actually fixes
An Incoterm (International Commercial Term, updated as Incoterms 2020) answers two questions:
- Who pays for each leg — inland transport, export clearance, port charges, ocean or air freight, insurance, import duty, final delivery.
- Where risk transfers — the exact point where damage or loss stops being the seller's problem and becomes yours.
It does not cover payment terms, quality, or ownership of the goods. Those belong in your contract.
2. The five terms you will meet
| Term | Supplier pays until | Risk transfers | Best for |
|---|---|---|---|
| EXW | Factory gate | At the factory | You have your own forwarder in China |
| FOB | Loaded on the vessel at the Chinese port | When goods are on board | Most importers — the standard |
| CIF | Freight + minimum insurance to your port | When goods are on board | Buyers who want one invoice |
| DAP | Delivery to your address, duty unpaid | At destination | Door delivery without customs handling |
| DDP | Delivery with duty and taxes paid | At destination | Small orders, no import licence |
3. EXW: cheapest quote, most work
Ex Works means the supplier's job ends when the goods are packed at their factory. You pay inland trucking, export clearance, port charges and freight. The quote looks lowest and often is — provided you have a forwarder who can pick up in China, which most can, usually for $150–$400 per container inland.
Watch for: EXW quotes that quietly include the supplier's own inland cost, and factories who will not let your truck in without a "loading fee" that was never mentioned.
4. FOB: the default for most buyers
Free On Board: the supplier delivers to the port, clears export, and loads the goods on the vessel. You control the freight forwarder and therefore the freight cost. This is the right default for most importers because:
- You see the real freight price instead of a marked-up one
- You own the bill of lading relationship with your forwarder
- Comparing suppliers is fair, because everyone quotes to the same point
5. CIF: convenient, but check the numbers
CIF bundles freight and insurance into the supplier's price. Convenient, and sometimes genuinely cheaper because high-volume suppliers get better freight rates. But:
- The insurance is usually minimum cover (Institute Cargo Clauses C) — it excludes many of the things you would actually claim for
- Freight is often marked up 20–60% with no breakdown
- Risk still transfers when the goods are loaded, even though the supplier arranged the freight
Ask for the CIF quote and the FOB quote. If the difference between them is bigger than your own forwarder's rate, take FOB.
6. DDP: easiest, and the easiest to overpay
Delivered Duty Paid means the supplier handles everything, including import duty, and the goods arrive at your door. It is genuinely the simplest option for small orders and buyers without an import licence.
The trade-off is transparency. In DDP quotes we routinely see freight marked up 50–100%, and duty estimated generously rather than calculated. DDP also leaves you without your own customs record, which can matter for VAT recovery and for your import history.
If you use DDP, ask for the duty rate and the HS code in writing. A supplier who cannot name the HS code is guessing at your duty — and keeping the difference.
7. Which should you ask for?
- First order, small volume: FOB if you have a forwarder; DDP if you do not and the order is under about $5,000.
- Regular container orders: FOB, with your own forwarder. Always.
- You buy from several suppliers: FOB plus consolidation at a Chinese warehouse, so one container carries all of it.
- You have a Chinese logistics partner: EXW can be marginally cheaper, since you control every leg.
- Avoid mixing terms across suppliers you are comparing — convert everything to FOB landed and compare that.
Whichever term you pick, the comparison that matters is landed cost at your volume, not the number on the quotation. Our free landed cost calculator converts any quote — EXW, FOB or DDP — into a door-to-door figure across 26 destinations, so two suppliers quoting different terms can be compared on the same basis.
Quick example
The same order quoted three ways:
| Term | Quoted price | What you still pay | Effective cost |
|---|---|---|---|
| EXW | $10,000 | Inland + export + freight + duty: $2,900 | $12,900 |
| FOB | $10,400 | Freight + duty: $2,500 | $12,900 |
| DDP | $13,600 | Nothing | $13,600 |
The DDP option is not outrageous — it is convenient. But it costs about $700 more than arranging the same shipment yourself, which is the price of convenience on a $10,000 order.
Frequently asked questions
Is FOB or EXW better?
FOB for most importers, because the supplier handles Chinese export clearance and inland delivery, which they do every day. EXW is worthwhile only if you already have a logistics partner in China who can collect from the factory.
Should I accept a DDP quote from a Chinese supplier?
For small orders and first shipments, it is a reasonable convenience. On larger orders, ask for the FOB price as well and compare — the gap is often 5–12% of order value.
Who pays import duty under FOB?
You do. FOB ends at the Chinese port, so duty, VAT and destination charges are yours. Budget them before you set your retail price — see our shipping and payment guide.
Want the freight number checked?
Send us your supplier's FOB or DDP quote. We will tell you whether the freight and duty inside it are fair before you commit.