EXW, FOB, CIF, DDP — Incoterms explained in plain English for UK importers buying from China. Find out which shipping term saves you the most money and keeps you in control.
In summary: Incoterms (International Commercial Terms) define who is responsible for shipping costs, insurance, and risk when goods move from a seller to a buyer. For UK importers buying from China, the four most important Incoterms are EXW (Ex Works), FOB (Free on Board), CIF (Cost, Insurance & Freight), and DDP (Delivered Duty Paid). Most experienced UK importers choose FOB as their default — it gives you control over freight costs without requiring you to manage Chinese logistics yourself. This guide explains each Incoterm in plain English so you can stop guessing and start importing with confidence.
Picture this. You've spent three weeks on Alibaba, shortlisted five suppliers, and finally found one with a decent product, a responsive sales rep, and a price that makes your margin spreadsheet smile. You send the purchase order. Then the quotation comes back with three mysterious letters: EXW Shenzhen.
EXW. What on earth does that mean? Are you paying for the shipping or are they? Who's responsible if the container falls off a lorry somewhere between Guangzhou and Felixstowe?
If you've ever squinted at a supplier's invoice wondering what FOB, CIF, or DDP actually means — you're in good company. Incoterms are one of the most misunderstood (and most important) parts of importing from China to the UK. Get them wrong, and you could be hit with unexpected costs, customs headaches, or lose a shipment mid-journey — a headache no small business wants to deal with.
So, without further ado, let's arm you with everything you need to know.
Incoterms — short for International Commercial Terms — are a set of standardised trade rules published by the International Chamber of Commerce (ICC). They define exactly who (buyer or seller) is responsible for each stage of a shipment: packing, loading, freight, insurance, export customs, import customs, and delivery.
There are 11 Incoterms in total, but for most UK businesses importing from China, you'll only ever deal with four of them: EXW, FOB, CIF, and DDP. Understanding the difference isn't just academic — it directly affects how much you pay, how much risk you carry, and how much control you have over your goods from factory to warehouse.
Think of Incoterms like a relay race. Each term defines exactly where the seller drops the baton and where the buyer picks it up. Drop it in the wrong place and the whole race falls apart.
Sourcing Hack #1: Always confirm which Incoterm applies before signing a purchase order. Add it to your standard supplier checklist. A quotation without a clearly stated Incoterm is a quotation you're not ready to accept.
EXW stands for Ex Works. Under EXW, the seller's responsibility ends at their factory gate. They pack the goods, and that's it. Everything from that point — collecting the goods from the factory, local transport within China, export customs clearance, sea or air freight, UK import customs, and final delivery — is entirely your responsibility.
For a seasoned importer with a trusted logistics operation already established in China, EXW can occasionally make sense. But for most UK SMEs and first-time importers, EXW is a nightmare in disguise. You'll need to arrange a Chinese trucking company, navigate Chinese export customs (in Mandarin), and coordinate every handoff along the way.
Suppliers often quote EXW because it's the most favourable term for them — they're off the hook the moment you collect. Don't be dazzled by a low EXW price without accounting for all the additional costs you're unknowingly taking on.
Sourcing Hack #2: If a supplier quotes EXW, ask them to requote FOB. The price will be slightly higher, but the supplier handles export customs and gets the goods to the port — which is exactly where you want to take over. You'll usually save money overall once you factor in the cost and complexity of organising Chinese logistics yourself.
FOB stands for Free on Board. Under FOB, the seller is responsible for getting the goods to the named port of origin (typically a major Chinese port like Shanghai, Ningbo, Guangzhou, or Shenzhen) and loading them onto the vessel. Once the goods are on board the ship, risk and responsibility transfer to you.
FOB is the sweet spot for most UK importers. You take control once the goods are at the port — which means you choose and negotiate with your own freight forwarder, you control the shipping timeline, and you can shop around for better rates. You're not at the mercy of your supplier's preferred (and often more expensive) shipping partners.
If you're working with a sourcing agent in China, they can often coordinate the FOB handoff and liaise directly with your freight forwarder — taking the headache entirely off your plate. For a full guide to what happens once your goods leave the factory, see our Complete Guide to Importing from China to the UK.
CIF stands for Cost, Insurance & Freight. Under CIF, the seller arranges and pays for ocean freight and minimum insurance all the way to the named destination port — in your case, a UK port like Felixstowe, Southampton, or Tilbury.
On the surface, CIF sounds like a great deal — the supplier handles the freight, so you don't have to. But here's the catch. The supplier chooses the freight carrier, and they almost always choose the cheapest one with the lowest insurance coverage. You're effectively paying for their freight choice, bundled invisibly into your product price, with zero transparency over the actual rate.
CIF works fine for smaller, lower-value shipments where simplicity is more important than cost control. But for anything significant, FOB gives you far better visibility and — once you have a reliable freight forwarder — usually lower total costs.
Sourcing Hack #3: Ask your supplier for both a CIF and FOB quote on the same order. Then get an independent freight quote from your forwarder for the FOB option. In nine out of ten cases, the FOB total comes in cheaper — and you'll have far better control over your supply chain. If you're unsure how to find a good forwarder, your Epic sourcing team can point you in the right direction.
DDP stands for Delivered Duty Paid. This is the maximum seller responsibility. Under DDP, the supplier handles absolutely everything: export clearance, international freight, UK import customs, UK import duties, and delivery to your door. You don't lift a finger until the pallet arrives at your warehouse.
DDP is increasingly popular on Alibaba and with suppliers offering door-to-door services. The convenience is real — but you pay a premium for it. The supplier bundles their freight, customs brokerage, and duty costs into your product price, typically with a healthy markup on top.
More importantly, under DDP the supplier is often listed as the official importer of record in the UK. This can create complications with VAT reclaim, customs records, and UK compliance requirements. DDP is fine for samples and tiny test orders. For anything you're scaling, stick with FOB.
Here's the short answer: use FOB for most orders. It gives you control over freight costs without requiring you to manage Chinese-side logistics. You're in the driving seat from the moment goods are loaded at the port.
As a practical guide:
EXW — Avoid unless you have an established logistics operation in China.
FOB — Best for most UK importers. Use this as your default.
CIF — Acceptable for small, low-value shipments where simplicity matters more than cost.
DDP — Good for samples and test orders only. Not for scaling.
Whether you're exploring White Label, Private Label, or Secret Label sourcing, the right Incoterm will save you real money on every order. At Epic Sourcing, we help UK clients navigate this — alongside every other stage of the import journey.
Sourcing Hack #4: Build a simple Total Landed Cost calculator for each order. Add: FOB price + freight + UK import duty + VAT + last-mile delivery. This is your real cost of goods — not just the supplier's headline price. Your margin depends on getting this number right before you place the order, not after the goods arrive.
Regardless of which Incoterm you agree with your supplier, UK import duties and VAT are always your responsibility as the UK importer. HMRC doesn't care about your supplier arrangement — once goods arrive in the UK, duty and import VAT are due.
UK import duty rates vary by product category and are listed in the UK Global Tariff. Import VAT at 20% is charged on top of the customs value (product cost + freight + insurance). Under FOB, you control the freight element of that customs value calculation — which can occasionally reduce your VAT base slightly compared to a CIF quote.
If you're not already using a licensed customs broker or freight forwarder, check out our Complete Import Guide for a full breakdown of what to expect at UK customs — including how to reduce your overall cost of goods.
Once you've settled on FOB as your default Incoterm, the next logical question is: how much does the freight actually cost? Sea freight, air freight, and express couriers all have wildly different price points — and the right choice depends on your order size, timeline, and product type.
We've broken this all down in our companion post: How Much Does It Cost to Ship from China to the UK? (2026 Guide). It covers sea freight FCL and LCL rates, air freight pricing, express courier costs, and practical tips for reducing your freight bill.
EXW means Ex Works. The supplier's responsibility ends at their factory — you're responsible for all transport, export clearance, freight, and UK import customs from that point. For most UK importers, EXW is best avoided in favour of FOB, which puts the supplier in charge of getting goods to the Chinese port before responsibility transfers to you.
In most cases, yes. FOB gives you control over which freight forwarder you use and how much you pay for shipping. With CIF, the supplier arranges freight on your behalf — usually at a higher cost with less transparency. FOB typically results in lower total landed costs and better supply chain visibility.
Under DDP, the supplier technically pays the duty on your behalf and includes it in your product price. However, under DDP the supplier may be listed as the UK importer of record, which can create complications with VAT reclaim and customs records. For regular commercial imports, FOB with your own customs broker is cleaner and usually cheaper overall.
FOB is by far the most common Incoterm used by UK importers buying from Chinese factories. It offers a sensible split of responsibility — the seller handles getting goods to the Chinese port, and the buyer takes over from there with their own freight forwarder.
Technically, FOB applies to ocean transport. For air freight, the equivalent term is FCA (Free Carrier). In practice, many suppliers and importers still use FOB loosely for air shipments too. It's worth confirming the exact arrangement with your freight forwarder to avoid any ambiguity.
Use the UK Trade Tariff tool on GOV.UK to look up your product's commodity code and the applicable import duty rate. Your freight forwarder or customs broker can also advise on classification. For most Chinese goods, standard MFN duty rates apply — check before you commit to a supplier price.
Incoterms might not be the most glamorous part of running a product business. But knowing the difference between FOB and EXW could save you thousands of pounds on your next order — and prevent a very expensive surprise.
At Epic Sourcing, we've helped hundreds of UK businesses navigate every stage of the import journey — from finding the right factory to coordinating freight and getting goods landed at your UK warehouse without nasty surprises. Whether you're exploring our White Label, Private Label, or Secret Label packages — we've got you covered.
Ready to take the guesswork out of importing from China? Book a free strategy call with our team, or drop us a line at hello@epicsourcing.co.uk | 07551 136406.
— TK Wang, Founder & Director @ Epic Sourcing
