Incoterms?

Incoterms are the standard trade terms in a purchase contract that define exactly where the seller’s responsibility ends and the buyer’s begins — for freight, insurance, customs clearance, and import duties. In China export trade they are not a detail to leave ambiguous; they decide who arranges and pays for each leg of the journey.

The letters look small on a quote, but they can move the true landed cost substantially, because a low ex-factory price under one term may sit alongside freight, insurance, and duty that another term would have included.

FOB (Free On Board) is among the most common terms in China export. The seller is responsible for the goods and all costs up to the point they are loaded onto the vessel at the named port — for example, FOB Shenzhen or FOB Shanghai. From that point, all freight, marine insurance, destination port charges, customs brokerage, import duties, and inland delivery are the buyer’s.

In practice that means engaging a freight forwarder to book the shipment, arrange cargo insurance, file import documents, and deliver to your warehouse — and, for a first import, choosing a licensed customs broker in your country.

Terms slide along how much the seller handles. EXW (Ex Works) puts nearly everything on the buyer — freight, insurance, clearance, and duties from the factory door. FOB shifts the vessel-loading leg to the seller. CIF has the seller arrange freight and insurance to the destination port. DDP (Delivered Duty Paid) has the seller handle everything, including import duties at destination.

DDP is convenient, but confirm what duty rate the seller is using and whether it is correct for your HS code and country — a wrong assumption there resurfaces as a cost or a customs hold.

The buyer owns the classification. Regardless of term, the buyer is typically responsible for knowing the correct HS code for the product, the applicable import duty rate, and whether the category needs any certifications or declarations (some adhesive materials, for instance, travel with a safety data sheet).

Insurance follows the term. Under FOB, cargo insurance is usually the buyer’s responsibility — arrange all-risk marine cover through your forwarder rather than relying on the carrier’s limited liability. Inspect cartons for damage before signing the delivery receipt; noting damage at delivery preserves the claim.