When a Chinese factory sends you a price quote, you’ll see three letters at the bottom. Letters like EXW, FOB, CIF, DAP, or DDP.

Most buyers skip past those letters and look at the unit price. That’s a mistake.

Those three letters decide who pays for shipping. Who handles customs. Who takes the loss if goods get lost or broken. And where the factory’s job ends and your job begins.

If you’re new to Incoterms importing China, this guide explains the five terms you’ll actually see. In plain English. No jargon.

What Are Incoterms (And Why They Matter)

Incoterms are trade rules made by the International Chamber of Commerce (ICC). Think of them as a set of ready-made rules. They tell both sides who does what in a shipment.

The current version is Incoterms 2020. There is no 2025 or 2026 version. Some freight forwarders say there is, but that’s just marketing.

Each term tells you four things:

1. Where the seller’s job ends — the delivery point
2. When risk moves to you — the hand-off moment
3. Who pays for what — trucking, shipping, insurance, customs
4. Who handles customs — both export (leaving China) and import (entering your country)

Always write the version in your contract. Say “FOB Shenzhen, Incoterms 2020.” Don’t just say “FOB.” Without the version and the place name, the rule is not complete.

Getting Incoterms importing China right is one of the easiest ways to avoid surprise costs. The wrong term can add hundreds of dollars in fees you didn’t expect.

The 5 Incoterms You’ll Actually See When Importing from China

There are 11 Incoterms in total. But when you buy promotional products from China, you’ll only see these five:

EXW (Ex Works) — You Do Almost Everything

The factory just packs the goods and leaves them at their door. That’s it. You handle everything else.

You arrange the truck to pick up from the factory. You handle China’s export customs. You pay for international shipping. You handle import customs in your country. You pay import duties. You arrange final delivery.

EXW gives you the lowest product price. But that’s tricky. The price looks cheap because it doesn’t include any shipping or customs costs. Unless you have a shipping agent in China who can pick up the goods and handle export paperwork, EXW will cost you more than you think.

Most first-time buyers should stay away from EXW.

FOB (Free On Board) — The Most Common Choice for Sea Freight

The factory does everything up to putting your goods on the ship. They handle the truck from factory to port. They handle China’s export customs. They pay the port loading fees.

Once the goods are on the ship, it becomes your job. You pay for the ocean shipping. You handle import customs. You pay import duties.

FOB is the most popular term for sea freight from China. Why? Because you choose your own shipping company. That means you see the real shipping price. The factory can’t hide a markup inside the product price.

Important: Always name the actual port. Write “FOB Shenzhen” or “FOB Shanghai.” Don’t write “FOB China.” And use big ports, not small ones. If the factory uses a small port, your goods may need a second truck to a bigger port. That adds cost and time.

CIF (Cost, Insurance & Freight) — The Factory Arranges Shipping

The factory does everything FOB covers. Plus, they arrange and pay for the ocean shipping and basic insurance to your destination port.

But here’s the catch: risk still moves to you at the Chinese port — same as FOB. If the ship sinks, it’s your problem. You can claim insurance, but the factory only bought the cheapest coverage.

CIF feels easy because the factory handles shipping. But the shipping price they quote often includes a markup. And you still have to pay destination port fees, import customs, and duties. For most buyers, FOB is cheaper because you control the shipping cost.

DAP (Delivered at Place) — Delivered to Your Door, You Do Customs

The factory handles all the shipping to your door. Your warehouse. Your office. Or a local depot. But you handle import customs, duties, and taxes.

DAP is good if you want door-to-door delivery but have your own customs broker. Or if you want to control how your goods are classified for duties.

DDP (Delivered Duty Paid) — The Easy Button

The factory (or their shipping agent) handles everything. Factory pickup. Export customs. International shipping. Import customs. Duties. Taxes. Final delivery to your door.

You just receive the goods. That’s it.

DDP is the simplest option. One price covers everything. Zero paperwork. For small first orders under $5,000, DDP is often the right choice. You don’t have to deal with customs while you’re still learning how importing works.

But there’s a downside. You can’t see how the price breaks down. You don’t know how much is product cost, how much is shipping, and how much is duties. And if a DDP price looks too cheap, someone may be lying on the customs form to pay less duty. That can lead to seized goods and big fines.

Incoterms Importing China: Quick Comparison Table

Term	Who Pays Shipping	Who Handles Import Customs	Risk Moves to You At	Best For
EXW	You (everything)	You	Factory door	Buyers with a China shipping agent
FOB	You (ocean shipping)	You	Goods on ship at Chinese port	Most buyers — best price control
CIF	Factory (to your port)	You	Goods on ship at Chinese port	Buyers who want factory to arrange shipping
DAP	Factory (to your door)	You	Your door, before unloading	Door delivery with your own customs broker
DDP	Factory (everything incl. duties)	Factory	Your door, ready to unload	First-time buyers, small orders

Which Incoterm Should You Choose?

There is no single “best” rule for Incoterms importing China. The right choice depends on your order size, your experience, and whether you have your own shipping agent.

First order or small order (under $5,000): Choose DDP. It’s worth paying a bit more for the simplicity. You don’t deal with customs while you’re still learning. Many factories offer DDP by air or DDP by sea for small orders. The goods arrive at your door with all duties paid.

Regular importer ($5,000–$50,000): Choose FOB. You control the shipping cost. You pick your own shipping company. You avoid factory markups on freight. This is the sweet spot for most promotional product orders.

Large container orders (over $50,000): Choose FOB or EXW with your own shipping agent. Large volume gives you power to negotiate better shipping rates. No factory will pass that savings to you in a DDP quote.

Air freight or express courier: The correct term is FCA (Free Carrier). FOB is only for sea freight. But many factories still write “FOB” for air shipments out of habit. Just make sure both sides agree on who does what.

5 Common Mistakes (And How to Avoid Them)

1. Comparing EXW and DDP prices side by side.
An EXW price will always look cheaper. But EXW doesn’t include trucking, export customs, shipping, insurance, or duties. Before you compare, add up all the extra costs. Ask the factory for a DDP or FOB quote too. Then compare the total cost, not just the product price.

2. Forgetting to buy insurance under FOB.
FOB does not include insurance. If goods are damaged or lost at sea, you take the loss. Cargo insurance is cheap — usually 0.2 to 0.4% of the cargo value. Buy it through your shipping agent or a separate insurance company.

3. Writing “FOB China” without naming a port.
“FOB China” is not a real Incoterm. You must name the port: “FOB Shenzhen Port, Incoterms 2020.” If the factory uses a small port, your goods may need a second truck to a bigger port. That adds cost and time. The factory may refuse to pay for it.

4. Thinking CIF means the factory takes all the risk.
Under CIF, risk moves to you at the Chinese port — not your destination port. The factory pays for shipping and insurance. But if goods are damaged on the way, it’s your loss. “Factory pays shipping” does not mean “factory takes the risk.”

5. Accepting a DDP price that looks too cheap.
Say the import duty on your product is 15%. But the DDP quote only adds 5% to cover duties. That means someone is probably lying on the customs form. If customs catches it, your goods can be seized. Always ask: “How will this be declared at customs?”

How Incoterms Connect to Shipping Methods

Incoterms importing China rules say who does what. Shipping methods say how the goods actually move. They work together:

• Express courier (FedEx, DHL, UPS): Usually quoted as DDP or DAP. Some factories don’t have their own courier accounts. If you need the factory to ship via FedEx, you may need to give them your own account number. They book the pickup. You pay through your account. Always confirm who books and who pays.
• DDP by Air / DDP by Sea: Very popular for small and medium orders from China. The factory’s shipping agent handles everything door to door, including duties. By air, it takes 5–10 days. By sea, 25–40 days. Shipping prices go up and down with oil prices, busy vs. slow seasons, and world events. Always treat quoted freight rates as estimates, not fixed prices.
• LCL (Less than Container Load): This means your order is too small to fill a whole shipping container, so it shares space with other people’s goods. It’s the least popular choice for Chinese factories. The goods have to be trucked to a special customs warehouse. That costs more. Many factories charge an extra fee for LCL. If your order isn’t big enough for a full container, look at DDP by Sea instead.
• FCL (Full Container Load): Your goods fill a whole container. This is the standard for large orders. FOB pairs naturally with FCL. The factory loads the container, handles export customs, and you arrange the ocean shipping.

For more on shipping methods, transit times, and real cost examples, see our guide on shipping from China explained.

A Real Cost Example

Here’s how the same order looks under different Incoterms. This is a 5,000-unit lanyard order from Dongguan to Los Angeles. The numbers are examples only — your real costs will be different.

Cost Element	FOB Shenzhen	CIF LA	DDP LA
Product cost	$3,500	$3,500	$3,500
Trucking + export customs	Included	Included	Included
Ocean shipping	$1,200 (you arrange)	$1,400 (factory arranges)	$1,500 (factory’s agent)
Insurance	$80 (you arrange)	$100 (factory arranges)	Included
Destination port fees	$300	$300	Included
Import customs + duties	$400	$400	$440 (factory estimates)
Final delivery	$350	$350	Included
Total landed cost	$7,530	$7,750	$8,040

FOB is cheapest because you control the shipping. CIF adds about $220 in factory markups. DDP adds about $510 — but you do zero logistics work. You pay more for less hassle.

What to Write in Your Purchase Order

When you agree on Incoterms importing China, write them into your purchase order. And be specific. A vague term causes arguments later.

Your Incoterm must be in your purchase order. And it must be specific:

• ✅ “FOB Shenzhen Port, Incoterms 2020”
• ✅ “DDP Los Angeles warehouse, Incoterms 2020”
• ✅ “EXW Dongguan factory, Incoterms 2020”
• ❌ “FOB China”
• ❌ “DDP” (no place name)
• ❌ “FOB” (no port, no version)

For more on writing a complete purchase order, see our guide on how to write a purchase order to a Chinese factory.

FAQ

What is the best Incoterm for importing from China?

For most buyers, FOB is the best choice. It gives you control over shipping costs and clear rules. For first-time buyers or small orders under $5,000, DDP is easier and worth the extra cost. Avoid EXW unless you have a shipping agent based in China.

Is DDP safe when importing from China?

Yes, DDP is a real and widely used option. But if a DDP price looks too cheap, the factory may be lying on the customs form to pay less duty. If customs catches it, your goods can be seized. Use trusted shipping agents. Always ask how the goods will be declared. For the official rules, visit the ICC Incoterms 2020 page.

Does FOB include insurance?

No. Under FOB, you are responsible for buying insurance. It’s not required, but we strongly recommend it — especially for valuable cargo. Cargo insurance usually costs 0.2 to 0.4% of the cargo value.

Can I use FOB for air freight?

Not technically. FOB is only for sea freight. For air freight, the correct term is FCA (Free Carrier). But many Chinese factories still write “FOB” for air shipments out of habit. What matters is that both sides agree on who does what.

What’s the difference between DAP and DDP?

Under DAP, the factory ships to your door, but you handle import customs, duties, and taxes. Under DDP, the factory handles everything, including duties and taxes. DAP gives you control over customs. DDP gives you convenience.

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Need help choosing the right Incoterm for your next order? Contact us — we’ll help you compare quotes and avoid the hidden costs that catch first-time buyers off guard.