FOB vs CIF vs DDP: Which Incoterm Should You Use When Importing from China?

Introduction: The $3,000 Mistake

Understanding Incoterms isn't just paperwork — it's one of the biggest factors in your landed cost. Choose wrong, and you could overpay by thousands.

The 5 Incoterms You Need to Know

1. EXW (Ex Works) — The Buyer Does Everything

The supplier makes goods available at their factory. You handle everything else. Best for experienced importers.

2. FOB (Free On Board) — The Most Common

The supplier delivers to port, clears export, and loads the ship. You handle ocean freight, insurance, import, and delivery. Best for 80% of importers.

3. CIF (Cost, Insurance, Freight)

Supplier pays to your destination port including freight and insurance. You handle import clearance and delivery. Watch for inflated shipping costs.

4. CFR (Cost and Freight)

Like CIF but WITHOUT insurance. You must arrange your own cargo insurance.

5. DDP (Delivered Duty Paid)

Supplier delivers to your door, paying everything. You pay one price. Convenient but you pay a 3-6% premium.

Side-by-Side Cost Comparison ($50K order to UK)

| Incoterm | Total Landed Cost |

|----------|------------------|

| EXW | $69,560 |

| FOB | $69,562 |

| CFR | $69,562 |

| CIF | $69,900 |

| DDP | $72,000 |

Which Should You Use?

- FOB for orders $10K+ (most control, best value)

- CIF for orders under $10K (convenience)

- DDP for first-time importers (zero hassle, higher cost)

- EXW for large volume experienced importers

*Warren Smith is the CEO of LS International, managing international shipping and logistics for businesses importing from China.*