What Are Incoterms? FOB, CIF, EXW and DDP in China Sourcing

Incoterms means International Commercial Terms. The International Trade Administration and International Chamber of Commerce describe them as rules allocating transport, cost, and risk responsibilities between seller and buyer.

Incoterms 2020 has 11 rules . For most China sourcing buyers, the first four to understand are EXW, FOB, CIF, and DDP.

EXW usually means the seller makes the goods available at its premises, and the buyer handles more of the transport, export, and downstream work . For overseas buyers without China logistics support, EXW can be more difficult than expected.

FOB is common for sea freight. The supplier is responsible for delivering goods to a named Chinese port and handling the relevant export side. Risk usually transfers once the goods are loaded on board .

CIF means the seller arranges cost, insurance, and freight to the destination port . It does not mean the seller handles import clearance or destination-country duties.

DDP is easier for the buyer because the seller takes more delivery responsibility, including import-related arrangements . In practice, not every Chinese supplier can truly perform DDP well.

Incoterms do not decide whether goods are conforming. They do not decide when payment is safe. They do not decide what happens if the supplier is late. They do not decide where disputes are resolved.

For example, FOB Shanghai, Incoterms 2020 can clarify transport and risk transfer. It does not say whether the goods must pass third-party inspection or whether the supplier must refund for quality defects.

Writing only FOB or CIF is not enough. A better clause states the place and version, such as FOB Shanghai, Incoterms 2020.

Place affects the responsibility boundary. Version affects interpretation. The trade term in the contract, PI, commercial invoice, and shipping documents should match where possible.

When tariffs rise, customs costs increase, or goods are damaged in transit, Incoterms are among the first terms to review.

But they provide default allocation, not always a complete commercial answer. For tariff-change issues, see: Tariff Jumped: Who Bears the Loss?.

Incoterms are basic infrastructure in a China sourcing contract. They make shipping and customs responsibilities clearer, but they do not replace quality terms, payment terms, or dispute terms.

Before placing an order, confirm three things: the trade term, the named place, and the Incoterms version.

If you are unsure what FOB, CIF, EXW, or DDP in a supplier quotation means for you, contact me.

This article is part of the China Legal Glossary series. Related reading: Tariff Jumped: Who Bears the Loss?, What Is a China Purchase Order?, and Before You Pay a Chinese Supplier, Check These 10 Things.