By SupplierVerify Team | Published: February 21, 2026
You have found a supplier, negotiated the unit price, and are ready to place your first order. Then the supplier asks: "FOB or EXW?" If you do not know what those four letters mean, you are about to learn the hard way — through unexpected charges that can add 20–40% to your total cost. This guide explains every shipping term you need to know, which one to choose, and how to avoid the most expensive mistakes first-time importers make.
Incoterms (International Commercial Terms) are standardized three-letter codes published by the International Chamber of Commerce that define who pays for what in an international shipment — transportation, insurance, customs clearance, and duties. They determine the exact point at which risk transfers from seller to buyer. Without a clearly defined Incoterm in your purchase order, you and the supplier may have completely different assumptions about who is responsible when something goes wrong.
Under EXW, the supplier's only responsibility is to make the goods available at their factory or warehouse. You handle everything else: loading, export clearance in China, freight, insurance, import clearance at destination, and final delivery. EXW gives the supplier the lowest price on paper — because it includes almost nothing. For a first-time importer without a logistics partner in China, EXW is a recipe for chaos: you need a Chinese export agent, a freight forwarder, and someone to physically collect the goods from the factory.
Verdict: Avoid EXW for your first orders unless you have a trusted freight forwarder with a China office who can handle everything from factory pickup onward.
FOB is the standard for most China import shipments — and for good reason. The supplier is responsible for getting your goods through Chinese export customs and loaded onto the vessel at the port. Your responsibility (and risk) begins once the goods cross the ship's rail. You pay for ocean freight, insurance, and everything at the destination port.
FOB gives you control over your freight forwarder and shipping costs without the headache of managing Chinese export logistics. It is the right balance of responsibility for most importers. Your freight forwarder handles the ocean leg, and you have visibility into shipping schedules and costs.
Verdict: FOB is the recommended starting point for most importers. It keeps export logistics on the supplier while giving you control over freight.
Under CIF, the supplier pays for freight and insurance to your destination port. On the surface, this sounds convenient: one less thing to arrange. But the hidden risk is significant. The supplier chooses the freight forwarder — and they will choose the cheapest option, not the fastest or most reliable. CIF shipments are notorious for arriving late, with minimal insurance coverage (often just 110% of invoice value), and with destination port fees that were never disclosed upfront.
Verdict: CIF looks simpler but often costs more in the long run. Only use it for small trial orders where convenience outweighs cost control.
DDP is the ultimate convenience term: the supplier handles everything from factory to your door — including import duties and customs clearance at destination. The price you agree is the total price you pay. This is the default for many Amazon FBA sellers using freight forwarders who offer "door-to-door" service.
The trade-off: DDP gives you zero visibility into the cost breakdown. You cannot tell if you are overpaying for freight or duties because the supplier's forwarder controls the entire chain. DDP also means the supplier's forwarder is the importer of record — which can create complications with customs authorities if something goes wrong.
Verdict: DDP is convenient for experienced importers using a trusted freight partner. For new importers, FOB with your own forwarder is safer.
Ask yourself these questions:
A good freight forwarder is worth their weight in gold. They handle documentation, negotiate rates, track shipments, and resolve problems at the port that would take you days to untangle yourself. When choosing a forwarder, look for one with a physical office in China — this is critical for coordinating factory pickups and export clearance. Ask for references from other importers in your product category. A forwarder who specializes in furniture may not be the best choice for electronics, and vice versa.
Not sure which Incoterm to use, or how to negotiate shipping terms with your supplier? Our Deal Guard service provides in-person negotiation support in China, including contract terms, payment milestones, and logistics setup — so your first shipment arrives without surprises.