FOB, CIF or DDP: Choosing the Right Incoterm for Your China Order
Incoterms are one line in the contract and one of the biggest sources of misunderstanding. Buyers choose FOB out of habit, accept CIF because the supplier offers it, and discover the differences only when a claim lands on their desk. Here is the practical field guide.
The four terms you will meet
| Term | What the supplier provides | What you (buyer) handle |
|---|---|---|
| EXW | Goods at the factory gate | Everything: export, freight, insurance, import |
| FOB | Goods on board the ship at the named port | Ocean freight, insurance, import |
| CIF | Goods + freight + insurance to the destination port | Import clearance, inland delivery |
| DDP | Goods delivered, duty paid, to your door | Almost nothing — but you pay for it |
Which one is right for you
- First-time importer: FOB is the most common starting point — it gives you control of freight and the clearest cost picture. Book your own forwarder.
- Watching every dollar: FOB with your own forwarder is usually cheaper and more transparent than CIF, because CIF freight quotes are often marked up.
- Time-poor: CIF can be convenient, but verify the freight quote independently — overcharging on freight is one of the classic supplier markups.
- Door delivery for small goods: DDP suits low-volume, high-value or urgent shipments (often air freight), but duty and tax calculation must be done correctly — mistakes surface at customs.
Risk and money: where the traps are
- Risk transfers at the named point — with FOB, once goods are on board, most risks are yours. That makes the loading inspection and document check critical.
- Insurance: CIF includes only minimum cover (Institute Cargo Clauses C in most cases). For valuable cargo, buy additional cover yourself.
- "Inland FOB": some suppliers quote FOB to their own inland warehouse — a different animal. Confirm the named port in writing.
- DDP duty risk: if the declared duty classification is wrong, the liability can land on you. Use a licensed broker for DDP.
The two lines that protect you
Whatever term you choose, put two things in the contract: the exact Incoterm with the named place (e.g. "FOB Shenzhen, Incoterms 2020") and the document chain (B/L, packing list, inspection report) required before final payment. The term protects you only when it is specific.
Confused by Incoterms?
We help buyers structure orders with the right terms — and verify loading, documents and quantity at the factory end.
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