Export from China
Incoterms 2020 for apparel buyers: EXW, FOB, CIF and DDP explained
Incoterms decide who pays for each part of the journey and where the risk passes from seller to buyer. For apparel from China the common ones are FOB, where the factory puts the goods on board the ship in China and you handle freight and import; CIF, where the seller also pays freight and minimum insurance but risk still passes in China; and DDP, where the seller delivers to your door with duties paid.
Key takeaways
- Incoterms 2020 has 11 rules; FAS, FOB, CFR and CIF are for sea and inland waterway transport.
- FOB: the seller clears export and loads the goods on board, and risk passes on board in China.
- Under CIF the seller pays freight and minimum insurance to your port, but risk still passes on board in China.
- Under DDP the seller carries cost and risk to your door, including import duty and VAT.
- Under EXW the buyer takes over at the factory gate, including Chinese export clearance.
Reference information, not legal advice. Regulations change; always confirm current requirements with the official source linked below or a compliance professional before shipping.
The 11 Incoterms 2020 rules
| For any mode of transport | For sea and inland waterway only |
|---|---|
| EXW — Ex Works | FAS — Free Alongside Ship |
| FCA — Free Carrier | FOB — Free On Board |
| CPT — Carriage Paid To | CFR — Cost and Freight |
| CIP — Carriage and Insurance Paid To | CIF — Cost, Insurance and Freight |
| DAP — Delivered at Place | |
| DPU — Delivered at Place Unloaded | |
| DDP — Delivered Duty Paid |
The four you will meet most often
| EXW | FOB | CIF | DDP | |
|---|---|---|---|---|
| Export clearance in China | Buyer | Seller | Seller | Seller |
| Ocean freight | Buyer | Buyer | Seller | Seller |
| Insurance | Buyer | Buyer | Seller (minimum) | Seller |
| Risk passes | At factory | On board in China | On board in China | At your door |
| Import clearance, duty & VAT | Buyer | Buyer | Buyer | Seller |
EXW — Ex Works
The buyer collects from the factory and handles everything, including Chinese export clearance. It looks cheapest on paper, but export clearance has to be done by a Chinese entity, which often causes practical problems for overseas buyers.
FOB — Free On Board
The seller handles export clearance and loads the goods on board the vessel at the Chinese port. The buyer books and pays the ocean freight and handles import. It is the most common term for container shipments of apparel because the buyer controls freight cost and schedule.
CIF — Cost, Insurance and Freight
The seller pays freight and minimum insurance to the destination port. The detail people miss is that risk still passes on board in China, so if goods are damaged at sea the buyer claims on the insurance.
DDP — Delivered Duty Paid
The seller delivers to your door with import duties and taxes paid. It is the simplest for the buyer, but the seller must be able to act as, or arrange, the importer in your country, and the price includes all those costs.
How to choose
If you already have a freight forwarder, FOB (or FCA) usually gives you the best control and price. For a first import, DDP removes the import paperwork, at a cost. For LCL and air shipments, the any-mode rules (FCA, CPT, DAP) fit better than the sea-only rules. And since CIF only gives minimum insurance cover, many buyers prefer to arrange their own.
Final thoughts
Incoterms don’t set the price. They set the responsibilities behind it. Compare quotations on the same Incoterm, and make sure the term on the contract matches how the goods will actually move.