Why Incoterms Matter Before You Place an Order
Incoterms define exactly where a seller's responsibility ends and a buyer's begins — for cost, risk and logistics arrangement. Getting this wrong, or simply not asking, is one of the most common ways new importers end up with unexpected charges or gaps in cargo insurance coverage. Three terms come up most often in China sourcing: EXW, FOB and CIF.
EXW: Ex Works
Under EXW, the supplier's responsibility ends at their factory or warehouse door. The buyer arranges and pays for everything from that point forward: origin trucking, export customs clearance, main freight, import clearance, and final delivery. EXW gives buyers the most control over the logistics chain, but it also means managing the most moving parts, which is where a freight forwarder earns its value.
FOB: Free on Board
Under FOB, the supplier is responsible for delivering the goods to the origin port and loading them onto the vessel. Once the cargo is on board, responsibility transfers to the buyer, who arranges the main freight, import clearance and delivery from the destination port. FOB is the most common term in China sourcing because it splits responsibility at a clear, easily verified point.
CIF: Cost, Insurance and Freight
Under CIF, the supplier arranges and pays for main freight and insurance to the destination port, in addition to origin handling. The buyer takes over from the destination port onward, handling import clearance and final delivery. CIF can look simpler on paper, but buyers should confirm exactly what insurance coverage is included and who is choosing the carrier.
Who Is Responsible for What
| Stage | EXW | FOB | CIF |
|---|---|---|---|
| Export customs clearance | Buyer | Seller | Seller |
| Origin port charges | Buyer | Seller | Seller |
| Main freight | Buyer | Buyer | Seller |
| Cargo insurance | Buyer | Buyer | Seller (to destination port) |
| Import customs clearance | Buyer | Buyer | Buyer |
| Destination delivery | Buyer | Buyer | Buyer |
Choosing the Right Term for Your Sourcing Strategy
Buyers who want maximum control over carrier selection, routing and cost typically prefer EXW or FOB, paired with an experienced freight forwarder to manage the parts the supplier no longer handles. Buyers who prefer a simpler supplier relationship, particularly for a first order with a new factory, sometimes prefer CIF — provided they confirm the insurance terms rather than assuming full coverage.
Getting Support Regardless of the Term You Choose
Whichever Incoterm your purchase order uses, the logistics chain still needs to be managed end to end — export documentation, main freight booking, customs brokerage and final delivery. Our team works with buyers across all three terms, stepping in at whichever point our client's responsibility begins and carrying the shipment through to final delivery.
