Incoterms® 2020 Guide
Who pays for shipping? Who handles the risk? Select a term below to visualize responsibilities.
FOB - Free On Board
The industry standard. Seller handles local costs and export customs. You take over once goods are on the ship.
REPA's Advice
Best balance for most importers. Gives you control over shipping costs without the local headache.
Confused by Terms?
Don't risk your profit margin. Let REPA handle the negotiations and logistics for you.
Incoterms Comparison Table
| TERM | TRANSPORT COST | RISK TRANSFER | CUSTOMS (IMPORT) |
|---|---|---|---|
|
EXW
Ex Works
|
Buyer pays all transport costs from factory door | Risk transfers at factory door | Buyer handles all import procedures |
|
FCA
Free Carrier
|
Seller pays to carrier (truck/airport). Buyer pays main freight. | Risk transfers when delivered to carrier | Buyer handles import customs clearance |
|
FOB
Recommended
Free On Board
|
Seller pays to load on ship, buyer pays ocean freight | Risk transfers when goods cross ship's rail | Buyer handles import customs clearance |
|
CIP
Carriage & Ins. Paid
|
Seller pays freight & insurance to destination | Risk transfers at first carrier (origin) | Buyer handles import customs and duties |
|
CIF
Cost, Insurance & Freight
|
Seller pays ocean freight and insurance to destination port | Risk transfers when goods cross ship's rail (same as FOB) | Buyer handles import customs and duties |
|
DAP
Delivered at Place
|
Seller pays all transport to final destination | Risk transfers at final destination (ready for unloading) | Buyer pays duties and taxes |
|
DDP
Delivered Duty Paid
|
Seller pays all transport costs to final destination | Risk transfers at final delivery point | Seller handles all import procedures and duties |
Common Questions & Expert Advice
Practical insights from REPA's 10+ years of sourcing experience.
What is FOB, and why does REPA recommend it for most importers?
FOB (Free On Board) means the seller is responsible for delivering the goods to the port of shipment, handling export clearance, and loading them onto the vessel. Once the goods pass the ship's rail, the risk transfers to the buyer.
REPA's Advice
This is the most recommended term. It strikes the best balance between cost control and operational ease. Buyers can control ocean freight costs without dealing with local logistics hassles in China.
What is the core difference between FOB and CIF?
The main difference lies in who pays for freight and insurance, and the point of risk transfer:
CIF (Cost, Insurance & Freight): The seller pays freight and insurance up to the destination port. However, note that risk transfers to the buyer as soon as goods are loaded at the origin port (same as FOB).
Potential Pitfall
CIF looks convenient, but there are often hidden "destination charges" at the arrival port, making the final total cost potentially higher than FOB.
Is DDP the best choice for Amazon sellers?
DDP (Delivered Duty Paid) is the simplest option for the buyer because the seller is responsible for delivering the goods to the door and paying all duties.
REPA's Advice
Although DDP is the most "worry-free," it lacks transparency. You cannot see the true breakdown of freight, taxes, and original product price. If you want to pursue ultimate profit optimization, it may not be the optimal solution in the long run.
Which term should I choose for complete control over the shipping process?
You should choose EXW (Ex Works).
Responsibility: The seller is only responsible for handing over goods at the factory. The buyer bears all costs and risks from the factory door to the final destination.
REPA's Advice
We only recommend choosing EXW if you have a very trusted and professional freight forwarder in China, as it demands high management capability and effort from the buyer.
DAP and DDP look similar; what is the main difference?
The key difference lies in import clearance and duty payment:
- DAP (Delivered at Place): The seller is responsible for transport to the destination, but the buyer handles import clearance and pays duties and taxes.
- DDP (Delivered Duty Paid): The seller handles everything, including import clearance and paying all related taxes and fees.
Note: When using DAP, please ensure you have a customs broker ready at the destination.