The Incoterm decides who pays for what and — more importantly — where risk transfers. Choosing it wrongly can add unexpected cost to an order that looked profitable on paper. This matters more for glass than for most goods because freight is a large share of landed cost.
The four terms you will actually see
EXW — Ex Works
The supplier\’s factory gate. You take possession there and arrange everything: loading, export clearance, main carriage, insurance, import clearance.
Risk: the moment the goods leave the supplier\’s loading area. That means damage between the factory and the port is yours, even though you did not load the truck.
Use it when: you have your own forwarder with a consolidated rate and you control the booking. Rarely the right choice for a first order.
FOB — Free On Board
The most commonly used term for Chinese suppliers. The supplier handles export clearance and loading onto the vessel. Main carriage and insurance are yours.
Risk: transfers once the goods are on board the vessel at the port of loading.
Use it when: you have a freight rate you trust, usually with an established forwarder.
CIF — Cost, Insurance and Freight
The supplier pays main carriage and minimum insurance to your named destination port. Import clearance and duty remain yours.
Risk: still transfers at the origin port. Insurance is arranged by the supplier and is frequently minimal cover.
Use it when: you want a single all-in number for comparison, or for a first order where you do not yet have a trusted forwarder.
Be aware of what CIF does not cover: destination port charges, import duty, VAT, customs clearance, inland delivery, and demurrage caused by documentation problems. Many buyers assume CIF means door-to-door and get caught.
DDP — Delivered Duty Paid
The supplier delivers to your door with everything paid including duty and tax.
Use it when: the goods are low value, the quantity is small, or you genuinely lack import capability.
Caution: DDP requires the supplier to be able to act as importer of record in your country, which is not always possible and can create tax complications for you. Also, the price is built around an assumed duty rate. If the actual rate differs, someone absorbs the difference, and it is not always you.
How to compare quotations fairly
You cannot compare a FOB price with a CIF price and conclude which supplier is cheaper. Normalise first.
Take every quotation and convert it to the same basis. A practical approach:
| Step | Action |
|---|---|
| 1 | Ask every supplier for FOB and CIF on the same port pair |
| 2 | Subtract the freight difference to get back to a common basis |
| 3 | Add the same destination charges to all of them |
| 4 | Add the same duty and tax assumptions |
| 5 | Only then compare unit prices |
Do not skip step 4. Duty rates vary significantly between HS codes, and two suppliers quoting the same product may be using different codes. That discrepancy alone can change which supplier is cheaper.
Other terms you may encounter
- FCA — Free Carrier. Similar to FOB but handover happens earlier, at the seller\’s premises. Increasingly used in China for container shipments.
- CPT and CIP. CIF equivalents using the named place of destination rather than port of shipment.
- EUR1 and preferential tariffs. Not an Incoterm, but related. If your country has a trade agreement with China, a certificate of origin can reduce duty substantially. Ask whether the supplier can supply it.
Practical recommendation for a first order
Ask for both FOB and CIF. Use FOB if you have a forwarder you trust with a real rate. Use CIF for your first shipment if you do not, then benchmark the actual freight against what the supplier quoted. That gives you a genuine number for future orders instead of a supplier estimate.
Whatever term you choose, put it in writing on the quotation and the purchase order. \”FOB Qingdao\” and \”FOB port\” are not the same thing, and the difference is a real cost at the destination.
Tell us your destination port and we will quote both FOB and CIF so you can compare properly. Request a quotation.