The short answer
If you already work with a freight forwarder and want control of the shipping leg, choose FOB Shenzhen. If you want one delivered cost to your port, ask for CIF. If you are a small buyer who wants the shipment to arrive at your door with import formalities handled, ask whether a DDP quotation is available for your route. EXW is rarely the best fit for a first-time importer, because it leaves the buyer to organize even the pickup and export clearance. Availability of each term depends on the route and is confirmed per shipment.
What an Incoterm does and does not do
Incoterms are published by the International Chamber of Commerce; the current edition is Incoterms 2020. A term allocates three things between seller and buyer: who arranges and pays for transport, who carries the risk of loss or damage at each point, and who handles export and import clearance. It does not decide when you pay, who owns the goods, the warranty, or the product specification. Those belong in the purchase agreement. A common mistake is to treat the Incoterm as a complete contract; it is only the delivery chapter.
The five terms buyers meet most
| Term | Seller handles | Buyer handles | Typical fit |
|---|---|---|---|
| EXW (Ex Works) | Makes goods available at the named place | Pickup, export clearance, all freight, import | Buyers with their own China agent and forwarder |
| FOB (Free On Board) | Delivers on board the vessel at the named port; export clearance | Sea freight, insurance, import | Experienced importers with a forwarder |
| CIF (Cost, Insurance and Freight) | FOB duties plus sea freight and minimum insurance to your port | Unloading, import clearance, inland delivery | Buyers who want a landed port price |
| DAP (Delivered at Place) | Transport to the named destination, ready for unloading | Import clearance, duties and taxes | Buyers with a local customs broker |
| DDP (Delivered Duty Paid) | Everything up to delivery, including import clearance, duties and taxes | Receiving the goods | Small buyers who want one door-to-door arrangement |
FOB and CIF apply only to sea and inland waterway transport. For air or express, the multimodal terms (FCA, CPT, CIP) are the formal equivalents, though in everyday trade people still say FOB for air quotes. That habit is worth correcting in writing so that no one assumes the wrong risk transfer point.
FOB Shenzhen in practice
FOB is the term most trade-savvy buyers prefer for sea freight. The seller delivers the cargo on board the vessel at the named port, typically Yantian or Shekou, and clears it for export. From that point, risk and cost are the buyer's. The advantage is control: you choose the forwarder, compare freight quotes, and track the booking yourself. The disadvantage is that you must manage that relationship, including the booking and the documents the forwarder needs. Always name the port in the quotation (FOB Shenzhen Yantian, for example) rather than a vague FOB China.
CIF and why the insurance detail matters
Under CIF the seller arranges and pays sea freight and insurance to your named destination port. The seller's duty ends, and the risk passes, once the goods are on board at the origin port; the insurance is there to protect the buyer during the voyage. Under Incoterms 2020 the default insurance level for CIF is a minimum cover, so a buyer who wants broader protection should ask for it explicitly or buy additional insurance. Treat CIF as a convenient price basis, not as proof that the journey is risk-free.
DAP and DDP for small buyers
For marketplace sellers and small distributors, DDP can look ideal: one arrangement, delivery to a warehouse, and no customs paperwork on your side. The trade-off is transparency. The cost of duty and tax is folded into the arrangement, classification and declared value matter more, and not every route can be offered. DAP leaves import clearance to you but removes the transport work. Whichever you choose, agree in writing who is the importer of record, because that party carries responsibility for the declaration. The HS code note explains why classification should be settled with a licensed customs broker before the first order.
Who pays for what, leg by leg
It helps to see the journey as legs: from the factory to the origin port, the ocean or air leg, the destination port, customs, and finally inland delivery to your address. Under EXW the buyer pays and arranges every leg. Under FOB the seller covers the first leg and export clearance, and the buyer the rest. Under CIF the seller also covers the main transport leg and minimum insurance. Under DAP the seller covers transport up to the destination but the buyer clears import. Under DDP the seller covers all legs including duties and taxes. Drawing this list once, with your own forwarder's name beside each leg, is the fastest way to see why one quotation differs from another and which party you would call at 2 a.m. when a container is stuck.
Choosing a term by buyer type
- Marketplace seller, first order: DDP or DAP to a warehouse, if offered, keeps the process simple. See solutions for e-commerce sellers.
- Distributor with a forwarder: FOB Shenzhen, with your forwarder booking sea freight.
- Importer who wants a landed port cost: CIF, with import clearance by your broker.
- Trading company with a China agent: EXW can work, but make sure the agent can handle export clearance properly.
Common mistakes
- Naming no place. A term without a named port or address is incomplete; write the exact location.
- Mixing air with sea terms. FOB and CIF do not apply to air shipments.
- Ignoring who clears export. Under EXW the buyer is responsible, which is often impractical without a local agent.
- Comparing quotes on different terms. A FOB figure and a CIF figure are not comparable until freight and insurance are added to the first.
- Forgetting the payment terms. The Incoterm says nothing about when payment is due; set that in the order confirmation.
What to write into the order
State the Incoterm and edition (Incoterms 2020), the named place, the responsible party for export and import clearance, the insurance level, and the ready date. Roadtrace confirms the available terms for each route in writing; see the logistics and shipping page and the modes and times note for the practical side, then send your destination and volume through the quote form.