SourcingCraft Insights · Incoterms Guide · 2026-09-29
Understanding Incoterms for China Sourcing: EXW, FOB and DDP Explained
Incoterms are often the least understood part of a China sourcing quote, yet they decide who pays for freight, who carries the risk, and who handles customs. This guide explains the terms buyers see most often when working with Chinese suppliers.
What are Incoterms and why do they matter?
Incoterms are internationally recognised rules that define the delivery point, the cost split and the transfer of risk between buyer and seller. In a China sourcing context, the term on your quote can change the final price you pay, so it is worth reading it carefully before comparing offers.
What does EXW mean in practice?
EXW (Ex Works) means the seller makes the goods available at their factory. The buyer arranges and pays for everything after that point: inland trucking, export customs, ocean freight, insurance, import customs and final delivery. The factory price may look low, but your total cost includes several additional steps.
What does FOB include?
FOB (Free On Board) means the seller is responsible until the goods are loaded on the vessel at the named port of shipment. This is a common choice for sea freight from Chinese ports. Export customs clearance is usually handled on the seller side, while the buyer covers ocean freight and everything that happens after arrival.
What is DDP and when is it useful?
DDP (Delivered Duty Paid) means the seller bears the cost and risk until the goods are delivered to the named destination, including import duty. It can be convenient for first-time buyers because the quoted price is close to a landed cost. Duty rates depend on the product classification and the destination country, so it helps to confirm what is included.
Which Incoterm should a first-time buyer choose?
There is no single answer, because the right term depends on your experience, budget and risk appetite. FOB is widely understood and strikes a practical balance. DDP is convenient, although the seller may add a margin for handling customs. EXW gives the buyer maximum control but also the most work. A practical step is to compare the estimated landed cost under each term before you decide.
How can a sourcing agent help with Incoterms?
A sourcing agent can explain which term fits your order, help verify freight and duty estimates, and coordinate consolidation so a single term can cover multiple suppliers. At SourcingCraft, understanding Incoterms is part of our standard service alongside supplier verification, factory audits, sample checks, 1688 sourcing and order consolidation.
The right Incoterm can be the difference between a clear landed cost and an unexpected bill. Ask for the term to be written clearly in every quote, and request a breakdown of what each price includes before you sign.