For most importers, FOB (or FCA for containers) is the safest choice. The supplier gets the goods cleared for export and loaded, and you control the main freight with your own forwarder, so you can see and compare every cost. CIF and DDP look convenient, but the supplier picks the shipping line and you often pay for it later in destination charges.
See all 11 rules side by side: open the interactive Incoterms 2020 chart.
Key facts
- Incoterms 2020 is the current version, published by the International Chamber of Commerce (ICC). There are 11 rules.
- They decide who pays for each part of the journey and where risk passes from seller to buyer.
- They do not decide the price, payment terms or when ownership passes.
- FOB, CFR and CIF are for sea and inland waterway only. For containers, the ICC recommends FCA, CPT or CIP.
- Always write the rule with a named place and the version, e.g. “FOB Shanghai, Incoterms 2020”.
Which Incoterms do importers use most?
| Incoterm | Seller pays up to | Risk passes to buyer | Who does import customs and duty |
|---|---|---|---|
| EXW (Ex Works) | Goods ready at seller’s premises | At seller’s premises | Buyer |
| FCA (Free Carrier) | Handing goods to buyer’s carrier, export cleared | When handed to the carrier | Buyer |
| FOB (Free On Board) | Goods loaded on the vessel, export cleared | On board the vessel at origin port | Buyer |
| CFR (Cost and Freight) | Ocean freight to destination port | On board at origin port | Buyer |
| CIF (Cost, Insurance, Freight) | Ocean freight and minimum insurance to destination port | On board at origin port | Buyer |
| DAP (Delivered at Place) | Delivery to named place, not unloaded | At named destination | Buyer |
| DDP (Delivered Duty Paid) | Everything, including import duty and tax | At named destination | Seller |
What does EXW mean, and why is it risky?
Under EXW the seller only makes the goods available at its factory. You arrange everything else, including loading the truck and export customs clearance in the seller’s country. That is hard to do from abroad, and if the export declaration is not in your name properly it can cause problems later. EXW looks cheapest on the quote but is often the most work. FCA is usually a better choice.
What is the difference between FOB and FCA?
Both mean the seller clears the goods for export and hands them to your carrier. With FOB, risk passes when the goods are on board the ship. With FCA, it passes when the seller hands the goods to the carrier, for example at the container terminal or your forwarder’s warehouse.
For container shipments, goods are handed over at the terminal days before loading, so the ICC recommends FCA. In practice FOB is still very common. Both work if your contract is clear.
Is CIF a good deal for importers?
Often not. Under CIF the seller pays ocean freight and insurance to your port, but:
- Risk passes to you at the origin port, even though the seller arranged the insurance.
- CIF only requires minimum insurance cover (Institute Cargo Clauses C), which excludes many types of damage.
- The seller chooses the shipping line and forwarder. Some take a low ocean rate and recover it through high destination charges billed to you.
If you buy CIF, ask for the insurance certificate and get a quote for destination charges before you agree.
Should I ask my supplier for DDP?
Only if you trust them and want a hands-off delivery. Under DDP the seller pays import duty and tax in your country, so they must be able to act as the importer there. Problems:
- You cannot see what was declared to customs, and you are still affected if it is wrong.
- The duty and tax are built into the price, often with a margin.
- In many countries a foreign seller cannot easily act as importer of record or reclaim import VAT.
For regular imports, most businesses buy FOB or FCA and handle import clearance themselves through a customs broker.
Which Incoterm should I choose?
- First orders, small volumes: FOB or FCA with your own forwarder. You control the cost and the timeline.
- No forwarder yet: CIF can work, but get a destination charges quote first. See hidden charges in China freight quotes.
- Door-to-door with no work: DAP, then clear customs yourself, or DDP with a supplier you trust.
- Avoid: EXW, unless your forwarder can handle export clearance in the supplier’s country.
What to do next
- Pick FOB or FCA as your default, with a named port or place.
- Write it in the purchase order as “FOB [port], Incoterms 2020”.
- Get your own forwarder to quote from that point to your door.
- If the supplier offers CIF or DDP, ask for a breakdown and compare with your FOB plus forwarder cost.
- Agree payment terms separately. Incoterms do not cover payment.
Common mistakes
- Using FOB for air freight or courier shipments (it is a sea-only rule)
- Not naming the exact place, which leaves room for argument about who pays what
- Assuming CIF insurance covers you fully
- Thinking the Incoterm decides when you own the goods
Related questions
- How do I make sure my China freight quote has no hidden charges?
- How is import duty calculated?
- What is a bill of lading?
Sources: ICC Incoterms® rules, ICC Academy: FCA or FOB, ICC Incoterms 2020 checklist. Last reviewed October 2026.