TL;DR: FOB, CIF, and DDP determine who pays for what between the factory and your door. FOB gives you control but more work. CIF splits the difference. DDP is hands-off but most expensive. Here is the real cost breakdown for each.
Shipping terms are the part of importing that nobody explains clearly. Here is the clear version.
| Term | Factory Pays For | You Pay For | Best For |
|---|---|---|---|
| EXW (Ex-Works) | Nothing beyond factory gate | Everything — trucking, port, ocean, insurance, customs, delivery | Never, unless you live in China |
| FOB (Free On Board) | Trucking to port + loading on ship | Ocean freight, insurance, destination customs, delivery | Experienced importers with a freight forwarder |
| CIF (Cost, Insurance, Freight) | Everything up to your destination port | Customs clearance and inland delivery at destination | First-time importers — simpler |
| DDP (Delivered Duty Paid) | Everything door-to-door including import duties | Nothing | Easiest but highest cost |
When to Use Each
FOB works when you have a freight forwarder you trust and you want to control shipping costs. You pay the ocean freight directly and can shop rates. The downside is that you are coordinating two parties: the factory and the forwarder. If something goes wrong, they blame each other.
CIF works when you want the factory to handle logistics but not import duties. The factory books the vessel and pays insurance. Your goods arrive at your port. You clear customs. This is the standard first-order shipping term because it simplifies the transaction without giving up all control.
DDP works when you want one price and zero logistics headaches. The factory quotes a door-to-door rate. You pay once. The goods arrive. The premium over CIF is typically 10-25 percent depending on the destination country and product category. For small orders under $5,000, the convenience is usually worth the premium.
The Hidden Cost in FOB
FOB looks cheaper on the quote. But when you book ocean freight yourself as a first-timer, you will pay retail rates. A freight forwarder who consolidates 100 containers per month pays wholesale rates. The factory probably has a forwarder who gives them wholesale rates. Ask the factory what CIF would cost. The difference is often smaller than you expect because their forwarder quotes lower than yours.
Written by Xinya Zhang. I coordinate shipping from China for my clients. Tell me what you are importing