You’ve found a supplier. You’ve negotiated the price. Now the factory asks: “FOB or CIF?”
If you don’t know the answer, you’re about to overpay — or get surprised by a bill you didn’t see coming.
The Four Terms — What They Actually Mean
| Term | You Pay | Factory Pays | Risk Transfers | Best For |
|---|---|---|---|---|
| EXW | Everything from factory gate onward | Nothing beyond the factory | At the factory door | Never — unless you live in China |
| FOB | Ocean freight + destination charges + customs | Transport to port + loading | When goods cross the ship’s rail | Experienced importers |
| CIF | Destination charges + customs + inland delivery | Ocean freight + insurance to your port | Same as FOB | First-time importers |
| DDP | Nothing — all included in the price | Everything door-to-door | Delivered to your address | First order, small buyers |
EXW — Never Use This Unless You Live in China
EXW means you pick up the goods at the factory gate. You arrange Chinese domestic transport. You handle export clearance. You book the ship. One missed step and your goods sit on a loading dock in Guangzhou for three weeks while you figure out Chinese customs paperwork.
Skip EXW entirely unless you have a China office.
FOB — More Control, More Work
FOB is the standard. The factory delivers to the port and loads the ship. After that, it’s yours. You book the ocean freight. You handle customs at destination. You arrange inland delivery.
Advantage: you control the freight forwarder. The factory can’t pad the shipping cost. You see the actual bill of lading. You track the container yourself.
Disadvantage: you need to coordinate the destination leg. If this is your first import, it’s one more thing to learn.
FOB works when you have a freight forwarder you trust. Get quotes from three. Ask each one: “What’s your all-in rate from Shanghai to my door, including customs clearance?” Compare. Finding a reliable freight forwarder is like finding a reliable factory — verify before you commit →
CIF — Simpler, More Expensive
CIF means the factory handles the ocean freight and insurance. They book the ship. You handle customs and delivery in your country.
CIF seems simple. It is — until the factory’s “preferred forwarder” pads the bill. The factory quotes you $3,500 for freight when the market rate is $2,200. You have no way to know without getting your own quotes first.
CIF works as a starting point. Get the CIF quote. Then get your own FOB quote from an independent forwarder. Compare. The factory’s CIF should be close to your forwarder’s FOB + freight. If it’s significantly higher, the factory is making money on the shipping. That’s not a deal-breaker — but you should know what you’re paying for.
DDP — Everything Included, Zero Surprises
DDP is door-to-door. The factory (or their forwarder) handles everything from production to your warehouse. One price. One contact. Goods arrive at your address.
DDP costs 15-25% more than FOB. For a $10,000 order, that’s $1,500-2,500 extra. But — there are no surprise bills. No customs agent calling you at 7am asking for a bond you didn’t know about. No container sitting at the port accumulating storage fees because you didn’t file the right form.
DDP is for your first order. Once you know the process, switch to FOB.
The Hidden Cost Nobody Mentions
Destination charges. The container arrives at your port. Now you pay: terminal handling, customs bond, customs clearance fee, trucking to your warehouse. These add $800-1,500 per container in the US. More in Europe. CIF doesn’t cover them. DDP does. FOB doesn’t.
When you get a CIF quote, ask: “What are the estimated destination charges for my port?” If they can’t answer, your forwarder can.
Which One for Your First Order?
Order under $10,000: DDP. Pay the premium. Learn the process without the stress.
Order $10,000-50,000: CIF. Let the factory handle the ocean leg. Get destination charges from your own forwarder first.
Order $50,000+: FOB. You have enough volume to negotiate directly with freight forwarders. Use your own.
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