These are four common terms of trade (aka
incoterms) when buying from China. A product price is always quoted according to an Incoterm.
Basically how much of the shipping you pay the supplier to handle. Based on the incoterm you select, you can let the supplier handle the goods transportation to
- no further place but the factory/manufacturer, which is EXW
- a nearby port in China, which is FOB
- a nearby port in your country, which is CIF (including maritime insurance)
- all the way to your facility, which is DAP/DDU (not including tariff and taxes)
In brief, it can be divided into 2 categories.
- EXW and FOB means you – the buyer can use your own freight agent and pay for their services directly.
- Other term means the seller use their freight agent and you still pay for that.
Commonly, you can find the term states clearly in the Proforma Invoice or Quote Sheet provided by the seller. If not, advise the seller to add into the papers to avoid any further confusion even dispute.
When you compare prices from several suppliers, make sure they are based on the same term. For example, A-seller quoted EXW $5/unit while B-seller quoted FOB $5.5/unit, it doesn’t mean the price from B-seller is not more competitive than A-seller.
* Most suppliers will quote EXW or FOB price at the beginning, and are flexible in providing different price based on different term upon your request.