International trade has its own language, and it is made of three-letter codes called Incoterms.
If you choose the wrong acronym on your contract, you could be legally responsible if the ship sinks, or stuck with a $5,000 customs bill you didn’t expect. Here are the only three Incoterms you really need to know as a small-to-medium importer.
1. EXW (Ex Works)
The Supplier Does Nothing.
- What it means: The supplier finishes the goods and leaves them on their factory dock.
- Your Responsibility: EVERYTHING. You must hire a truck to pick it up, pay Chinese export customs, pay the sea freight, pay US insurance, and pay US taxes.
- Risk Level: High. If the truck crashes in China, it’s your problem.
- Best For: Experienced importers with their own freight forwarders in China.
2. FOB (Free on Board)
The Middle Ground.
- What it means: The supplier pays to get the goods onto the ship (On Board) at the Chinese port.
- Your Responsibility: You pay for the Ocean Freight and everything that happens after the ship leaves China (US Customs, trucking to warehouse).
- Risk Level: Medium.
- Best For: Most Amazon FBA sellers. It gives you control over the shipping cost but makes the supplier responsible for Chinese export paperwork.
3. DDP (Delivered Duty Paid)
The VIP Service.
- What it means: The supplier does everything. They pay shipping, customs duties, and taxes. They drop the box at your front door (or Amazon warehouse).
- Your Responsibility: Unloading the truck.
- Risk Level: Lowest.
- Best For: Beginners. You know exactly what the total cost is upfront.
Which Should You Choose?
- New Importer? Choose DDP. It reduces stress and surprise fees.
- Scaling Up? Switch to FOB. You can usually find a cheaper freight forwarder than your supplier can, saving you margin on large orders.
Calculating your shipment size? Don’t forget that Incoterms affect WHO pays for the shipping, but CBM determines HOW MUCH it costs. Use our CBM Calculator to check your volume.