EXW, FOB, CIF or DDP? Which Incoterm suits importing machinery from China

What an Incoterm defines — and what it doesn’t

Incoterms® 2020 are the International Chamber of Commerce (ICC) rules for international trade terms: 11 terms in total. According to the ICC, each term specifies where the seller delivers, when the risk of loss or damage passes from seller to buyer, which costs each party bears, who contracts for carriage, who arranges insurance (only CIF and CIP require insurance), and who handles export and import formalities.

The 11 terms are split into two groups: EXW, FCA, CPT, CIP, DAP, DPU and DDP apply to any mode of transport; FAS, FOB, CFR and CIF apply only to sea and inland waterway transport. For construction machinery from China to Latin America, the most used terms are EXW, FCA, FOB, CFR, CIF, DAP and DDP; we explain each below.

Equally important is what Incoterms do not cover: payment method (deposit, balance, letter of credit), when title transfers, and remedies for delay or nonconforming goods. None of that is in the Incoterms® and must be written into the contract. Ask that quotes show “term + named port or place + version,” for example “FOB Shanghai, Incoterms® 2020” or “CIF Callao, Peru, Incoterms® 2020.” A quoted “CIF price” alone often leads to disputes over costs and responsibilities at destination.

The seven most used terms in one table

The table shows the default allocation under Incoterms® 2020. “Seller” is the exporter (for example, YUYAN) and “Buyer” is the importer. The contract can modify this allocation, for example whether freight includes unloading at the destination port.

Note the C terms (CFR, CIF): the place the seller pays freight to and the place risk transfers are not the same. The seller pays freight to the destination port, but risk transfers to you when the goods are loaded on board in China. The ICC calls the C group “shipment terms,” not “arrival terms.” In the D group (DAP, DDP), delivery occurs at destination.

EXW and FCA: lowest price, most responsibility for you

EXW is the term with the fewest seller obligations: delivery is simply making the goods available at the seller’s premises. Loading, transport, China export customs and all subsequent costs and risks are your responsibility. An EXW quote typically covers only the goods and packing, so it appears cheapest.

The issue is China export customs. The ICC notes EXW suits domestic trade; for international sales the buyer handles export formalities, which can create problems for both parties, so it “strongly recommends” considering FCA. For a Latin American buyer it is usually unrealistic to do China export clearance yourself; in practice you end up hiring a China freight forwarder or asking the seller to assist.

• Advantages: lowest quote and simplest to read; you control the route, the freight forwarder and consolidation.
• Risks: the seller has no obligation to load, so damage during loading is your responsibility; export clearance, export documents and inland transport in China are also yours, and any delay in that chain is your responsibility.
• Suitable for: buyers with a trusted China freight forwarder or consolidation warehouse, who consolidate shipments from multiple suppliers.

FCA splits responsibilities more reasonably: the seller loads the goods onto the vehicle you arrange at their premises, or delivers to the carrier at the freight forwarder’s warehouse or container terminal you specify, and handles China export clearance; thereafter freight and risk are yours. If you have a China freight forwarder, we recommend FCA instead of EXW — for example “FCA YUYAN Hefei yard (specify address)” or “FCA warehouse designated by your freight forwarder.”

FOB: for buyers who arrange their own sea freight

FOB is the Incoterm most familiar to Latin American buyers. The seller delivers the goods to the agreed Chinese loading port, completes export customs formalities, and places the goods on board the vessel named by you; delivery is then complete and risk transfers to you. Ocean freight, insurance, destination charges and import formalities are your responsibility.

• Advantages: you choose the shipping line and freight forwarder, compare freight rates and control sailing schedules; an importer with negotiated contract rates often achieves a lower total cost; you also choose the insurance cover and insurer.
• Risks: risk transfers to you at loading, so you must arrange marine insurance. The ICC also warns that if you fail to timely notify the vessel name and loading location, or if the vessel is delayed or closes for cargo early, you bear the related risks and costs even if the goods are not yet on board.
• Coordination: you deal directly with your China freight forwarder, and booking, port entry and loading times must be coordinated among the three parties.
• Containers: the ICC notes containerized cargo is better suited to FCA; FOB is intended for port-to-port bulk shipments. For complete machines shipped on general cargo vessels, ro-ro or flat rack, FOB is still commonly used.

Reference prices on this site are quoted as FOB so you can compare them with other suppliers. Reference FOB price. Not a final quotation; ask for the current price. See our FOB inquiry guide to read a FOB quote and to learn which costs must be added to arrive at your landed cost.

CFR and CIF: we book the vessel to your port, but risk transfers at the Chinese port

Under CFR and CIF the seller completes export customs, books the vessel and pays sea freight to the destination port; CIF additionally requires the seller to insure the goods. For buyers without a China freight forwarder this is the most convenient sea option: you tell us the destination port and we arrange the sailing schedule, lashing and securing, the bill of lading and the insurance policy.

A common misunderstanding concerns risk. The ICC explains that under CIF delivery occurs when the goods are loaded at the port of shipment and risk passes to you at that moment, even though the seller pays the freight. If the cargo is damaged at sea, you must claim from the insurer using the insurance policy, not from the seller.

• Insurance is minimum coverage: CIF requires the seller to insure under Institute Cargo Clauses ICC (C), which cover only named perils, for at least 110% of the contract price; for example, with a contract price of US$50,000 the insured amount must be no less than US$55,000. If you need broader coverage, request ICC (A) in your inquiry; the premium difference is charged separately.
• Destination charges are normally not included: terminal handling, bill-of-lading release and other port charges, discharge if not included in the carriage contract, and import duties and taxes are for you to pay. Confirm in the quotation which items are included.
• Slow customs clearance causes container demurrage: carriers allow a certain number of free days at destination and then charge per day. Have your documents and customs broker ready before the cargo arrives.
• The carrier is chosen by the seller: if you have carrier, route or transshipment-port preferences, state them when requesting a quotation.

CIF is widely used in Latin America, partly because some countries calculate import duties on the CIF value; for example, the Chilean Customs generally applies ad valorem duties and VAT on CIF value. If the cargo is containerized and handed to the carrier at the terminal, you can also choose CIP: risk transfers when delivered to the first carrier and the required insurance is ICC (A), which is broader. We can quote both terms.

DAP and DDP: delivery to the agreed place; the difference is import clearance

DAP and DDP are arrival terms: the seller arranges transport to the agreed place in the destination country (port, warehouse or site), delivery occurs with the goods on the transport and ready for unloading, and the seller bears the risk during transit; unloading is for you to handle. The key difference is import clearance: under DAP you (the buyer) do and pay for import formalities, duties and taxes; under DDP the seller does and pays them.

• Buyer advantage: minimal procedures and risk, with a door-to-door price; suitable if you lack import experience and do not have a local customs agent.
• Higher price: DDP includes end-to-end transport, customs clearance service, duties and taxes, and the ICC notes that the buyer pays more for this. Ask the seller to itemize each cost so you can review it.
• A foreign seller often cannot act as the importer: the ICC warns that DDP requires the seller to complete import customs clearance, which can be difficult for a foreign seller; some countries require import clearance to be handled by a local importer, in which case DDP cannot be used as-is and DAP should be used instead.
• Who is named on the import declaration may affect your tax treatment later—for example, whether import VAT can be claimed as input tax. Check this in advance with your accountant.

Rules in major Latin American markets also show that local professionals are essential for the import stage:

• Chile: according to Chilean Customs, if the commercial value of the goods exceeds FOB US$1,000 the importer must hire a customs broker (agente de aduanas).
• Peru: according to SUNAT, the intervention of a customs broker (agente de aduanas) is mandatory for imports with FOB value greater than US$2,000.
• Mexico: the importer must be registered in the SAT Padrón de Importadores and active in the Registro Federal de Contribuyentes (RFC); customs clearance is normally carried out through an agente aduanal.
• Colombia: Decreto 1165 de 2019 allows the importer to declare directly to customs for any amount, or to do so through an agencia de aduanas.

ImportantThe above reflects the official pages of each country as reviewed on this site in November 2026; the destination country’s current regulations and the actual characteristics of the goods prevail.

YUYAN DDP one‑stop service: CIF to your port, then a local customs agent manages the final leg

For these reasons our DDP one‑stop service is arranged like this: the sales contract with you is CIF destination port; after the goods arrive, import declaration, payment of duties and taxes, port pickup and delivery to your site are carried out by a local, qualified customs broker in the destination country. We engage and coordinate that broker; you receive a single total quote from China to your site and deal with one account manager throughout the process.

1. Confirming requirements: you tell us the model, destination country and delivery address, and whether the import declaration will be made under your company tax ID (for example RFC in Mexico, RUC in Peru, or RUT in Chile) or if you need a locally qualified company to import on your behalf.
2. Estimated taxes and fees: the customs broker estimates duties and taxes based on the equipment’s customs tariff code (HS code) and current rates, and lists local permits, inspections or registration requirements; used equipment, which in some countries has additional restrictions, is checked at this step.
3. Itemized quotation: CIF cargo price, destination charges, customs broker fees, estimated duties and taxes, and inland transport shown separately; the contract states which items we charge and which you pay directly to the local broker.
4. Shipment and documents: we book the vessel under CIF, stow, lash and insure the cargo, and prepare the commercial invoice, packing list, bill of lading and insurance policy to the local customs broker’s requirements; when a free trade agreement applies, we provide the certificate of origin.
5. Destination clearance: before the cargo arrives the customs broker prepares the declaration to minimize port and container delays; after customs release, inland transport is arranged to the location you specify.

ImportantBoundaries to note: under CIF the risk transfers to you once the goods are loaded at the Chinese port, and voyage risk is covered by the insurance. Import declaration is handled by the local customs broker according to law; whether customs releases the shipment, when it is released, and the final taxes are determined by the destination customs authority and we cannot make those decisions. Taxes quoted are estimates; the contract specifies how any difference with customs’ final assessment will be handled.

Benefits: you do not need to find a China freight forwarder or a local customs broker; documents are prepared correctly once according to the broker’s requirements, and the import stage is handled by a qualified local professional who knows your country’s rules, with clear responsibilities for each party.

With or without import experience: how to choose the right term

These suggestions are not fixed answers. The same buyer can choose DDP one-stop service for the first order to learn the process, then switch to CIF or FOB to reduce costs once they have their own customs agent.

Before quoting or signing, put these points in writing

• Term, agreed place and version: for example “CIF Manzanillo, Mexico, Incoterms® 2020”.
• Risk transfer point: for group C terms specify the Chinese port of shipment, because risk transfers there.
• Insurance: who arranges it, coverage type (ICC A or ICC C), sum insured (at least 110% of the contract price) and who receives the original policy.
• Costs included and excluded: inland transport in China, packing and lashing, destination terminal charges, unloading, customs agent fees and inland delivery.
• Tariffs and taxes: for DDP one‑stop service we list the tariff code, estimated rates and estimated amounts, and state that the customs determination governs and how any difference will be handled.
• Import declaration party: which company tax ID will be used for the declaration and which documents you need to provide.
• Documents checklist: commercial invoice, packing list, bill of lading, insurance policy, certificate of origin and any other documents required by the destination country.
• Timing: list equipment ready, estimated sailing and estimated arrival separately; customs clearance time depends on the destination country’s customs and must not be presented as a commitment.

Tell us your country, destination port or delivery address, and whether you already use a freight forwarder and customs broker; your account manager will provide a comparative quote for FOB, CIF and our DDP one‑stop service.