Incoterms rules when you buy from China: EXW, FOB, DDP

Example: a buyer in Austin has two quotes for the same steel water bottles, “EXW Yiwu” and “FOB Ningbo.” Which one? For most first orders, FOB or FCA. Under the ICC’s Incoterms® 2020 rules, FOB means the supplier clears the export and loads the goods on the ship you booked; once they are on board, loss or damage is yours. EXW leaves the Chinese export to you, and DDP hands your import to the supplier.

The EXW price will look lower, because it leaves out the trip to the port and the export.

The handover strip: where cost and risk become yours

Seven stops lie between a Chinese factory and your door: (1) the factory floor, (2) loaded on your truck, (3) export cleared in China, (4) handed to the carrier, (5) on board the ship, (6) arrived at the destination and (7) import cleared, at your door. Each rule hands you the cost at one stop and the risk of loss or damage at another, or at the same one.

The other four ICC rules are FAS (Free Alongside Ship), CPT (Carriage Paid To), CIP (Carriage and Insurance Paid To) and DPU (Delivered at Place Unloaded).

Row by row, in words:

• EXW: cost and risk pass at the factory, before loading.
• FCA: both pass on loading at the factory, or on handover to your carrier at the named terminal.
• FOB: both pass on board the ship in China.
• CFR: risk passes on board in China, but the supplier pays the freight to your port.
• CIF: the same as CFR, plus minimum insurance paid by the supplier.
• DAP: both pass on arrival at the named place, before import clearance.
• DDP: both pass on arrival, with import cleared and duties paid.

Look again at the CFR and CIF rows, because that gap is easy to miss. The supplier paid for the ship, so it feels like the supplier’s shipment. Once the goods are on board in China, a loss at sea is yours.

EXW: the price that leaves you the export

Under EXW the supplier delivers by putting the goods at your disposal at the named place, usually its own factory or warehouse. It doesn’t have to load your truck or clear the export. Risk passes to you right there, and so does every cost after it.

The ICC calls EXW the rule with the fewest obligations on the seller and tells buyers to use it with care. Take loading. Factories often load the truck themselves, since they have the equipment, yet under EXW the risk during loading may arguably be yours. Then there is the export, where the supplier only has to help with documents. A buyer who expects trouble clearing the export would do better with FCA, and EXW may suit domestic sales.

In China, the export is the hard part, and three official texts explain why:

• Customs Law, arts. 9, 11 and 24. The shipper declares exported goods to customs, itself or through a broker it hires, and must be on file with customs.
• Customs Order No. 253, art. 4. Going on file takes a business registered in China that has completed the foreign trade operator filing.
• The declaration form, item 3. The domestic shipper (境内收发货人) is a Chinese company or organization, on file with customs, that signed and performs the trade contract.

A buyer with no Chinese company meets none of these conditions, so someone in China who does has to make the declaration. In practice that means asking the factory, or a broker in China, to do the step the term took off the factory’s list. That step was never in the price you compared.

EXW works for a buyer with its own company in China. For a foreign buyer shipping a first order home, it is usually the wrong rule.

FCA and FOB: the usual way to buy from China

If you read only one section, make it this one. FOB is for sea and inland waterway transport only. The supplier clears the export and pays every cost until the goods are on board the ship you nominated at the named port. Risk passes to you when they are on board.

FCA works for any mode of transport, or a mix, and comes in two versions. If the named place is the supplier’s factory, the goods are delivered once loaded on the truck you arranged, and the supplier carries the risk of loading. If it is somewhere else, such as a container terminal, they are delivered when the supplier’s truck arrives there, ready to unload, at your carrier’s disposal. Either way, the supplier clears the export.

A container order commonly needs the second version, because the container is handed over at the terminal before it goes on a ship. The ICC’s rule text says FOB is not appropriate where goods reach the carrier before they are on board, for example at a container terminal, and points to FCA. FCA describes the handover as it happens.

Some buyers keep FOB because a bank, often under a letter of credit, wants a bill of lading saying the goods are on board. The 2020 rules dealt with that: the parties can agree that the buyer will instruct its carrier to issue an on-board bill of lading to the seller once the goods are loaded, and the seller passes it on.

So for a first order shipped in a container, ask for FCA at the named terminal. If the supplier will only quote FOB, take FOB with the port named. And if two suppliers quote on different terms, ask both to requote on the same term and place before you compare.

Example: 300 cartons, quoted “FOB Ningbo Incoterms 2020.” No prices, only who pays for each step.

Risk passes to you when the cartons are on board in Ningbo. The ICC’s own checklist notes that many disputes are over charges a rule leaves general, such as terminal handling at the port. Put those in one line of the contract, next to the term.

CFR and CIF: when the supplier books the ship

With CFR and CIF, the supplier books and pays the ship to your port. Risk, though, passes to you when the goods are on board in China, so if the ship never arrives, the supplier has still delivered.

CIF adds insurance, and the level matters. The 2020 rules keep CIF at the minimum cover of the Institute Cargo Clauses (C), which list the risks they cover. CIP, the sister rule for any mode of transport, now requires the Institute Cargo Clauses (A), which cover all risks, subject to exclusions. On a CIF order you may want your own cover on top, or a higher level written into the contract.

The ICC describes CIF as “reserved for use in maritime trade,” and for goods handed over at a container terminal its rule text points to CPT and CIP. Whichever you use, name the port of loading as well as your own, since the port in China is where risk passes.

DAP and DDP: delivered to you

Under DAP, the supplier delivers when the goods arrive at the named place in your country, on the arriving vehicle, ready to unload. Import clearance and duties are yours. DPU, the old DAT rule renamed in 2020, is the same except that the supplier unloads.

DDP goes one step further: the supplier also clears the import and pays the import duty and taxes. It is the rule with the most obligations on the seller of all eleven, and the ICC tells sellers who cannot clear the import in the buyer’s country to consider DAP or DPU. In some countries, it notes, foreign companies can’t carry out import customs and tax formalities at all.

So when a supplier offers “DDP to your door,” ask before you compare prices: who is the importer in my country, and whose name is on the customs entry? If it is your company’s name, the import filing is yours whatever the quote says, and so is the liability that comes with it. Your customs broker or authority can tell you what that means where you are.

The term on a Chinese quote

Chinese quotes and pro forma invoices may print the term in English, Chinese or both. These are the names in the official Chinese edition of Incoterms 2020, translated under ICC China (ISBN 9787566321206).

The term on the quote also lands on the export declaration. Its transaction method field (成交方式) records, from a customs code table, the price term the goods were actually sold on.

Two habits head off a lot of arguments. First, name the place after the term: “FOB Ningbo,” not “FOB China,” and the exact terminal if you can. For most rules, the ICC explains, the named place is where the goods are delivered and risk passes. Under CFR, CIF, CPT and CIP it is the destination the supplier pays to ship to instead. Second, name the version. Leave out “2020,” the ICC warns, and a judge or arbitrator may have trouble telling which rules apply. When we checked on October 18, 2026, Incoterms 2020 was still the ICC’s most recent version.

Who should be at the factory when risk passes

Under five of the seven rules on the strip, risk passes to you in China. A defect found after that is a claim against a supplier on another continent, under your contract of sale, and the Incoterms rules won’t help: the ICC says they don’t deal with the specification of the goods or with remedies for a breach. The cheap moment to find a problem is before the goods leave, and before you release the last payment.

That check needs someone on the ground. Our guide to checking a factory in China without flying there shows what a remote visit covers. The AQL sample size calculator tells you how many units to pull from your lot. And what drives the cost of a factory inspection explains how an inspector’s day is priced.

If you’d rather have one person follow the order from shortlist to shipment, see how to hire a freelance sourcing agent in China, and our handbook on hiring in China for the contract and the pay. People who do this work bid in the sourcing and quality control and logistics categories. A freelancer checks and reports; filing the export or the import is not part of that job.

Have someone check the goods before they become yours. Start a brief.