EXW: cheapest quote, most expensive shipment
Ex Works means the factory makes the goods available at their door and everything after that is yours. Every quote you receive on EXW terms will look wonderful, because it is the smallest possible number.
It is also the term under which you, sitting in Madrid or Mexico City, are legally responsible for arranging Chinese domestic transport, export customs and loading. In practice you will pay an agent to do all of it, and you will pay more than the factory would have.
EXW is for buyers with their own operation in China. If you do not have one, it is a trap dressed as a discount.
FOB: the sensible default
Free On Board. The supplier delivers the goods, cleared for export, onto the vessel at a named Chinese port. Risk passes to you there. You control the ocean freight and the destination.
This is the term most importers should use most of the time. It gives you control of the leg where the money is, without making you responsible for a customs system you cannot see.
CIF: convenient and worth checking
Cost, Insurance and Freight. The supplier arranges the ocean leg and the insurance to your port. Convenient, and there is a well-known catch: the supplier chooses the forwarder, and that forwarder can recover their margin through destination charges that land on you.
CIF is fine when you trust the supplier's forwarder. Ask what the destination charges will be before you agree to it.
DAP and DDP: one number
Delivered At Place: to your door, duty unpaid. Delivered Duty Paid: to your door, duty paid, customs cleared.
DDP is the simplest thing an importer can buy, and the only term where the quoted price is genuinely the final price. It costs more because someone is carrying the risk of the duty calculation, and if that person is competent it is money well spent.
- EXW is the cheapest quote and the most expensive shipment unless you have people in China.
- FOB is the sensible default for most importers.
- On CIF, ask what the destination charges will be. That is where the margin is recovered.
- DDP is the only term where the quoted price is the final price.
