Incoterms Explained for Wholesale Buyers: FOB vs EXW vs CIF vs DDP
What Incoterms Actually Do
Incoterms (International Commercial Terms) are standardized three-letter codes, published by the International Chamber of Commerce (current edition: Incoterms 2020), that define who pays for what — and who carries the risk — at each stage of moving goods from seller to buyer. They cover cost, risk, and shipping responsibilities. They do not cover when you pay, when ownership transfers, or how disputes are resolved — those belong in your payment terms and sales contract (see our payment terms guide).
The Four Terms Wholesale Electronics Buyers Meet Most
| Term | Seller is responsible until | Buyer takes over | Typically suits |
|---|---|---|---|
| EXW (Ex Works) | Goods are made available at the factory | Everything from the factory door: export clearance, inland trucking, freight, insurance, import | Experienced buyers with their own China-side forwarder |
| FOB (Free On Board) | Goods are loaded on the vessel at the named port (e.g. Shenzhen) | Ocean freight, insurance, destination port charges, import duties, final delivery | The most common basis for sea-freight wholesale; the default on most Sournex quotes |
| CIF (Cost, Insurance and Freight) | Goods reach the destination port, with minimum insurance arranged | Import clearance, duties, delivery from port | Buyers who want one quoted price up to the destination port |
| DDP (Delivered Duty Paid) | Everything, including import duties, delivered to the named place | Receiving the goods | Buyers who want minimal logistics involvement — usually at a higher price |
Risk follows a similar pattern: under FOB, risk passes to the buyer once the goods are on board the vessel; under EXW, it passes at the factory; under DDP, it stays with the seller until delivery.
What "FOB Shenzhen" Actually Covers
Because most Sournex quotes use FOB Shenzhen, it's worth being precise about what's inside the price and what isn't.
- Included in the FOB price: the product, standard export packaging, inland transport to the port, export customs clearance, and loading onto the vessel (origin handling charges are typically on the seller's side)
- Not included — your side: ocean or air freight, cargo insurance, destination port charges, import duties and taxes, customs brokerage, and delivery to your warehouse
Those buyer-side items are exactly what turns a quoted FOB price into your real cost — worked through in calculating landed cost and margin.
FOB and Air Freight: A Technical Wrinkle
FOB (along with CIF, CFR, and FAS) is formally defined only for sea and inland-waterway transport. For air freight or containers handed over at a terminal, the technically correct terms are FCA, CPT, or CIP. In practice, many suppliers still say "FOB" loosely for air shipments. If you're shipping by air, it's worth confirming in your inquiry which point the price actually covers up to — see our shipping and logistics guide for how air and sea freight compare.
How to Choose
- Full container, established forwarder: FOB (or FCA) keeps freight selection in your hands, which usually means better rates and visibility
- Small first order, no forwarder yet: a quote including freight to your destination (CIF-style, or a forwarder-arranged door delivery) can be simpler — just confirm exactly what's included
- Want zero logistics work: DDP exists, but expect a higher price, and check who is acting as importer of record
- You already manage China-side logistics: EXW can be cheapest on paper, but it makes you responsible for export clearance and the first leg of transport
Common Mistakes
- Comparing quotes built on different terms. An EXW price and a CIF price for the same product aren't comparable until you add the missing logistics costs to the EXW one
- Using a term without a named place. "FOB" alone is incomplete — it should read "FOB Shenzhen" (or the specific port) so there's no ambiguity about where responsibility shifts
- Assuming CIF insurance is comprehensive. CIF only requires minimum cover; if your goods are high-value or fragile, arrange broader insurance yourself
- Treating DDP as risk-free. Check who the importer of record is and what happens if customs requests extra documentation or charges
Frequently Asked Questions
Why does Sournex quote FOB Shenzhen?
FOB is the standard basis for sea-freight wholesale, and Shenzhen is a major export port close to the factory clusters. It also leaves you free to choose your own forwarder and compare freight rates, rather than being locked into a bundled price.
Can I request a quote on a different Incoterm?
Yes — mention it in your inquiry. Keep in mind that changing the term changes what the price includes, so the number will change too. See how to write an effective inquiry for what else to include.
Who pays import duties under FOB?
The buyer. Duties, taxes, customs brokerage, and destination charges are all on the buyer's side under FOB.
Does the Incoterm decide when I pay?
No. Incoterms only allocate cost, risk, and shipping responsibility. Deposit and balance timing are set separately in your payment terms.
Is the Incoterm the same as my first-order checklist?
It's one item on it. For the rest, see common mistakes first-time importers make.
The Short Version
Before comparing any two quotes, find out which Incoterm and which named place each one is built on. Then add the costs that fall on your side. That single habit prevents most of the "the cheaper quote turned out more expensive" surprises.
Not sure which term fits your first order? Include your destination and shipping method in your inquiry and the sourcing team will confirm what the quote covers, or browse the full catalog to start.