Incoterms are the shared language of international trade. They define who carries the cost and the risk at every stage of a shipment's journey. Understanding Incoterms is essential for anyone importing from China, so you're never blindsided by costs you didn't budget for. In this simple guide from MESAMA, we break down the most important Incoterms every importer needs to know.
What are Incoterms?
Incoterms (International Commercial Terms) are a set of global rules published by the International Chamber of Commerce. They define the obligations of the seller and the buyer: Who pays for freight? Who bears the risk? And exactly when does responsibility pass from one party to the other?
The key terms for importers
| Term | Meaning | Supplier's responsibility |
|---|---|---|
| EXW | Ex Works (factory pickup) | Minimum (you collect from the door) |
| FOB | Free On Board | Until the goods are loaded onto the ship |
| CIF | Cost, Insurance, and Freight | Until the port of arrival (insurance included) |
| DDP | Delivered Duty Paid | Everything up to your door (the most) |
FOB: the most popular choice for first-time importers
Under FOB (Free On Board), the supplier covers all costs until your goods are loaded onto the ship at the Chinese port. From that point on, responsibility passes to you. It's often the best choice because it:
- Gives you control over which freight forwarder you use.
- Keeps your costs transparent.
- Stops the supplier from marking up freight rates (something that can happen with CIF).
EXW, CIF, and DDP: when should you use them?
- EXW: You control everything, but you're also responsible for moving the goods from the factory door onward — too complex for beginners.
- CIF: Convenient, but the supplier may hide a margin in the freight and insurance charges.
- DDP: The easiest option (the supplier handles everything up to your door), but it's the most expensive and the least transparent.
MESAMA's tip
For first-time importers, FOB usually offers the best balance between control and transparency. At MESAMA, we help you understand the right term for each deal and manage your sea freight and customs clearance from start to finish. Get in touch, or read up on the international shipping documents you'll need.