FOB vs CIF vs EXW Incoterms: A Simple Guide for Importers (2025)

When you receive a price quote from a supplier in China, you’ll inevitably see three letters following the price: EXW, FOB, or CIF. These aren’t just random acronyms; they are Incoterms rules, and understanding the difference between FOB, CIF, and EXW is absolutely critical for managing your costs, risks, and control when shipping from China.

Choosing the wrong Incoterm can lead to unexpected costs, logistical nightmares, and disputes with your supplier. As a sourcing agency that structures hundreds of international trade deals, we consider the selection of Incoterms a foundational part of any successful import strategy.

This simple guide will explain the three most common Incoterms® rules used in China sourcing – EXW, FOB, and CIF – breaking down precisely what they mean for you, the importer.

What are Incoterms Rules?

Incoterms (International Commercial Terms) are a set of pre-defined commercial terms published by the International Chamber of Commerce (ICC). They are globally recognized rules that define the responsibilities of buyers and sellers for the delivery of goods under sales contracts.

Crucially, they define:

Who pays for each part of the shipping journey? (e.g., trucking, port fees, ocean freight, insurance)
Where does the risk transfer from the seller to the buyer? (If goods are damaged, who is responsible?)
Who is responsible for handling customs procedures?

Understanding these points is vital for calculating your actual landed cost. Clearly explaining Incoterms helps avoid disputes.

EXW (Ex Works): Maximum Buyer Responsibility

EXW (Ex Works) puts the maximum responsibility and cost on you, the buyer.

Seller’s Responsibility: Make the goods available at their factory or warehouse, properly packaged and ready for shipment.
Buyer’s Responsibility: Everything else. You are responsible for arranging and paying for:
- Loading the goods onto the truck at the factory.
- Inland trucking to the port of origin.
- China export customs clearance.
- Origin port handling fees.
- International freight (sea or air).
- Destination port handling fees.
- Destination customs clearance (including duties & taxes).
- Final mile delivery to your warehouse.
Risk Transfer: Risk transfers to you the moment the goods are made available at the seller’s premises.

Pros for Buyer: Provides complete control over the entire logistics chain and potentially allows for the lowest initial product price (as shipping is not included). The difference between FOB and ex-works (exw) prices is the local transport and export fees. Cons for Buyer: Extremely complex to manage, especially for new importers. Requires deep logistics knowledge and reliable partners in China. Export customs clearance in China can be particularly challenging if you don’t have a local presence. We generally advise against EXW for beginners.

FOB (Free On Board): The Balanced & Recommended Option

FOB (Free On Board) is the most common Incoterm used in shipping terms from China, and the one we generally recommend for importers using their own freight forwarder. Understanding the meaning of the fob is critical.

Seller’s Responsibility:
- Package the goods.
- Arrange and pay for inland trucking to the specified port of origin.
- Clear the goods for export through Chinese customs.
- Load the goods onto the vessel nominated by the Buyer.
Buyer’s Responsibility:
- Nominate the shipping vessel (usually done by your freight forwarder).
- Pay for the international freight (sea or air).
- Arrange and pay for cargo insurance (optional but highly recommended).
- Handle all costs and procedures at the destination port (handling, customs, duties, delivery).
Risk Transfer: Risk transfers to you the moment the goods are loaded onto the vessel at the port of origin.

Pros for Buyer: Offers a good balance of cost, control, and convenience. You control the main (and most expensive) part of the shipping journey – the international freight – allowing you to choose your preferred carrier and freight forwarder. The supplier handles the complexities of inland transport and export customs in China. For the Buyer, this means you still need to manage the international freight and import process.

CIF (Cost, Insurance, and Freight): Convenience with Hidden Risks

CIF (Cost, Insurance, and Freight) seems convenient because the seller handles shipping to the port in your country. However, it often comes with hidden costs and a lack of control. Understanding CIF vs FOB is vital.

Seller’s Responsibility:
- All FOB responsibilities (packaging, inland trucking, export customs, loading onto vessel).
- Arrange and pay for the international freight to the designated port of destination.
- Arrange and pay for minimum insurance coverage.
Buyer’s Responsibility:
- All costs and procedures after the goods arrive at the destination port (unloading, import customs clearance, duties, taxes, final delivery). Who pays freight on CIF internationally? The seller. But you pay everything else upon arrival.
Risk Transfer: Crucially, risk still transfers to you the moment the goods are loaded onto the vessel at the port of origin, even though the seller pays for the freight.

Pros for Buyer: Seems simple upfront, as the seller quotes a price that includes shipping to your port. Cons for Buyer:

* Hidden Costs: The seller chooses the cheapest shipping line and insurance. You often face exorbitant destination handling fees (charged by the agent they chose), which you have no control over. These are the hidden costs of CIF shipping.

* Lack of Control: You have no say over the shipping line, transit time, or communication during transit.

* Minimal Insurance: The included insurance is usually the bare minimum and may not cover your full costs if damage occurs.

* Risk Transfer Issue: You bear the risk during ocean transit, even though you didn’t choose the carrier.

FOB vs CIF vs EXW: Responsibility Quick Reference Table

Responsibility Item	EXW (Buyer Pays)	FOB (Seller Pays)	FOB (Buyer Pays)	CIF (Seller Pays)	CIF (Buyer Pays)
Factory Loading	✅	✅		✅
Inland Trucking (to Port)	✅	✅		✅
Export Customs Clearance	✅	✅		✅
Origin Port Handling	✅	✅		✅
Loading onto Vessel	✅	✅		✅
— Risk Transfers Here —	(Factory)	(On Board)		(On Board)
International Freight	✅		✅	✅
Cargo Insurance (Min.)	✅		(Opt)	✅
Destination Port Handling	✅		✅		✅
Import Customs Clearance	✅		✅		✅
Gallery
Import Duties & Taxes	✅		✅		✅
Final Mile Delivery	✅		✅		✅

A Sourcing Agent's Perspective: Why We Almost Always Recommend FOB

Based on our extensive experience managing shipments for clients, FOB is typically the most suitable Incoterms for importers. Here’s why:

Control: It gives you control over the most expensive and critical part of the journey – the international freight. You can choose a reliable freight forwarder who works in your best interests, finding the optimal balance between cost and speed.
Transparency: With FOB, you get clear, itemized quotes from your own forwarder, avoiding the hidden destination charges often associated with CIF.
Risk Management: While risk transfers at the origin port, you have chosen the carrier and can arrange comprehensive cargo insurance tailored to your needs, rather than relying on the seller’s minimal coverage.

The CIF Trap: We strongly advise new importers to steer clear of the CIF method. The seemingly low initial price is often a “bait and switch,” with unexpected and inflated fees at the destination port wiping out any perceived savings. You lose control, visibility, and often end up paying more.

Frequently Asked Questions (FAQ) about Incoterms

Q1: Which Incoterm is best for importers?

For most importers buying containerized goods from China and using their own freight forwarder, FOB (Free On Board) generally offers the best balance of cost, control, and manageable responsibility. Therefore, understanding which Incoterm is best for importers usually points to FOB.

Q2: What’s the difference between Incoterms® 2010 and Incoterms® 2020?

The Incoterms rules are updated periodically by the ICC (the latest version is the Incoterms 2020 rules). For EXW, FOB, and CIF, the core responsibilities remain largely the same. The main changes in 2020 involved other terms, such as FCA and DPU, as well as clarification on insurance levels for CIF. It’s always best practice to specify “Incoterms® 2020” in your contracts.

Q3: Who pays for customs duties under FOB?

Under FOB terms, the buyer is always responsible for paying import duties and taxes in the country of destination. The seller is only responsible for export customs clearance in China.

Q4: Does the Incoterm affect the product price?

Yes, absolutely. An EXW price will be the lowest (only product cost), an FOB price will be slightly higher (includes local transport and export fees), and a CIF price will be the highest (includes international freight, insurance, and regional transport and export fees). You must compare quotes based on the same Incoterm to make an accurate comparison.

Conclusion: Choose Your Incoterm Wisely

Understanding FOB, CIF, and EXW Incoterms® is not just academic; it’s a fundamental aspect of managing your sourcing costs and risks when dealing with international trade terms. Choosing the proper term gives you control over your supply chain and protects your bottom line.

For most importers working with their own freight forwarder, FOB offers the best balance of cost and convenience. Be wary of the apparent convenience of CIF, and only consider EXW if you have significant logistics expertise in China.

Need help navigating Incoterms® and managing your international shipping?

Schedule a free consultation with our sourcing experts. We can help you structure your purchase agreements and manage the entire logistics process.