Incoterms are three letters that decide two things: who pays for each leg of the journey, and at which point the risk of loss moves from seller to buyer. Getting them wrong is one of the most common and most expensive mistakes in a first import.

## The four terms that matter

Most Chinese suppliers will quote you EXW, FOB or CIF. DDP appears when you ask for a delivered price.

**EXW — Ex Works.** The factory's obligation ends at their loading dock. You arrange everything: inland transport, export clearance, ocean freight, import clearance. This looks cheap and is rarely the right choice, because a Chinese factory is much better at booking a container than you are.

**FOB — Free On Board.** The seller delivers to the named port and clears export. Risk passes when the goods are loaded on the vessel. You pay ocean freight and insurance. This is the default for most container shipments and the easiest term to compare between suppliers.

**CIF — Cost, Insurance and Freight.** The seller pays freight and minimum insurance to your destination port. Note that risk still passes at the port of loading — CIF is FOB plus freight and insurance cost, not FOB plus risk transfer. Many buyers assume otherwise.

**DDP — Delivered Duty Paid.** The seller handles everything including import duty and delivery to your address. Convenient, and often 8–15% more expensive than arranging it yourself, because the seller builds in a margin for duty and freight risk.

## What "risk transfer" really means

If goods are damaged in transit under FOB, the loss is yours even though the seller booked the ocean freight under CIF. That is why cargo insurance matters. For a container worth USD 30,000, insurance typically costs USD 60–120. Buy it.

## The four clauses buyers forget to specify

A quotation that says "FOB Ningbo" is incomplete. Insist on:

1. **Named port and terminal.** Ningbo has several terminals; the sailing schedules differ.
2. **Container type and stuffing date.** A 40HQ stuffed on the 28th may miss a vessel that closes on the 27th.
3. **Who pays origin charges.** THC, documentation fee and seal fee can add USD 200–400 per container.
4. **Validity period.** Factory prices move with steel, copper and the exchange rate. Fifteen days is normal.

## A practical default

For a first order under one container, ask for FOB plus a DDP comparison. The difference tells you what the freight and duty really cost, and gives you a number to negotiate against next time.

For recurring shipments where you control your own customs broker, FOB is usually cheapest. For samples and small parcels, DDP door-to-door is worth the premium because the paperwork is someone else's problem.

## Duty is not the same as VAT

Import duty depends on the HS code and your country's tariff schedule. VAT or GST is charged on top, usually on the duty-paid value. Confirm the HS code with your broker before production, not after — a wrong code can mean a reclassification, a fine, or goods held at the port.

Our quotation template always includes the HS code so the buyer can sanity-check the duty rate before committing. It costs nothing and avoids the worst kind of surprise.