FOB vs CIF vs EXW: Trade Terms for China Shipping

If you're importing from China, understanding Incoterms is not optional—it's essential. The trade term you agree on determines who pays for what, who owns the cargo at each stage, and how much you'll ultimately pay in shipping fees and surcharges.

What Are Incoterms?

Incoterms (International Commercial Terms) are standardized trade terms published by the International Chamber of Commerce (ICC). They define the responsibilities of buyers and sellers in international transactions, including:

• Point of delivery
• Transfer of risk
• Allocation of freight costs
• Insurance obligations
• Customs clearance responsibilities

FOB (Free on Board) — The Most Common China Term

FOB means the seller delivers the goods on board the vessel at the port of shipment. The buyer's responsibility—and cost—begins once the goods are on the ship.

FOB China Costs for the Buyer

When you buy FOB China, you pay for:

• Ocean freight from China to your country
• BAF (Bunker Adjustment Factor)
• CAF (Currency Adjustment Factor)
• PSS (Peak Season Surcharge)
• THC (Terminal Handling Charge) — origin
• DTHC (Destination THC)
• Customs duty and import taxes
• Last-mile delivery to your warehouse

FOB Meaning in Practice

"FOB Shenzhen" or "FOB Shanghai" means the Chinese supplier's responsibility ends when the cargo is loaded onto the vessel at that port. You'll receive the bill of lading (B/L) and must arrange the rest.

FOB vs CIF: What's the Difference?

The key difference: CIF includes insurance, FOB does not.

• FOB: You arrange and pay for shipping + insurance
• CIF: Seller arranges and pays for shipping + provides minimum insurance coverage

For most imports from China, FOB is preferred because you have more control over freight arrangements and can often negotiate better rates.

CIF (Cost, Insurance, and Freight)

CIF means the seller pays for cost, insurance, and freight to bring goods to the destination port. The seller's responsibility ends when the goods arrive at the destination port.

When to Use CIF

• You want the seller to handle freight arrangements
• You're new to international shipping
• The seller has better freight rates with carriers

CIF Limitations

While CIF sounds convenient, the insurance provided is only minimum coverage (110% of invoice value, typically covering basic risks). For high-value cargo, you'll want additional coverage.

EXW (Ex Works)

EXW is the most buyer-favorable term. The seller makes goods available at their premises. The buyer pays for everything from pickup onward.

EXW Shipping from China

With EXW, you pay for:

• Internal transportation in China (factory to port)
• China export customs clearance
• Document fees (Bill of Lading, etc.)
• All ocean freight charges
• Destination port charges
• Import customs clearance
• Last-mile delivery

EXW vs FOB

EXW gives you maximum control but requires more logistics expertise. It's often used when:

• You have your own freight forwarder in China
• You want to consolidate shipments from multiple suppliers
• You're shipping via your own agent

Which Trade Term Saves Money?

The answer depends on your volume and expertise:

For New Importers

Start with FOB or CIF. These terms are straightforward and let your supplier or their forwarder handle the complexity. Focus on finding the right product first; optimize logistics later.

For High-Volume Importers

Negotiate EXW or FOB and arrange your own freight. With 10+ containers per month, you can negotiate significant savings with freight forwarders—often 15–30% below carrier-published rates.

Total Cost Comparison Example

For a 20ft container of consumer goods from Shenzhen to Los Angeles:

• CIF: Seller builds in 10–15% margin on freight
• FOB: You arrange freight, no markup
• EXW: You arrange everything, maximum savings potential

Key Takeaways

• FOB is the most common term for China imports—seller loads cargo, buyer handles shipping
• CIF includes freight and basic insurance—convenient but more expensive
• EXW gives you full control but requires logistics expertise
• Always clarify port names (FOB Shanghai ≠ FOB Shenzhen)
• Understand which surcharges you're responsible for under each term