The Incoterm you agree to with your Chinese supplier determines exactly where cost and risk transfer from seller to buyer — and getting this wrong is one of the most common ways first-time importers end up with surprise costs or logistics headaches.
EXW (Ex Works): Maximum Buyer Responsibility
Under EXW, the supplier’s responsibility ends the moment goods leave their factory door. You (or your freight forwarder) handle everything from there: domestic trucking, export customs clearance, ocean freight, import customs, and final delivery. EXW often shows the lowest quoted unit price, but it shifts significant logistics coordination and risk to you — and export documentation errors on the supplier’s side can become your problem.
FOB (Free on Board): The Most Common Middle Ground
Under FOB, the supplier handles domestic trucking and export customs clearance, and responsibility transfers to you once goods are loaded onto the shipping vessel at the origin port. This is the most widely used arrangement for China sourcing because it splits responsibility at a clear, verifiable point (the ship’s rail) and lets you control the ocean freight booking and rate, often at better pricing than a supplier-arranged rate.
DDP (Delivered Duty Paid): Maximum Seller Responsibility
Under DDP, the supplier handles everything all the way to your door, including import customs clearance and duty payment. This is the simplest option for buyers new to importing, but you’re trusting your supplier’s freight forwarder with customs compliance on your behalf, which can create visibility and compliance risk if something goes wrong — you’re still the importer of record legally, even if the supplier is technically managing the process.
Which Incoterm Should You Choose?
First-time importers without an established freight forwarder relationship often start with DDP for simplicity, then transition to FOB once they’ve built out reliable freight forwarder and customs broker relationships, since FOB typically offers better cost control and shipment visibility for regular, ongoing import volume.
Frequently Asked Questions
Which Incoterm gives me the most control over shipping costs?
FOB generally gives you the most control, since you arrange and pay for ocean freight directly rather than accepting a bundled rate from the supplier.
Am I still legally the importer of record under DDP?
Yes — DDP simplifies logistics coordination, but you remain the legal importer of record and bear ultimate compliance responsibility even though the supplier manages the process.
Is EXW ever a good choice for a new importer?
Rarely recommended for beginners, since it requires you to independently arrange domestic trucking and export clearance in China — logistics most new importers aren’t equipped to coordinate directly.
