China Sourcing Incoterms Guide — EXW, FOB, CIF, DDP: Which Trade Term Works for You?
Same unit price, different landed cost once the term changes

Hello, this is GreenFrog Seoul.

"Two factories quoted the same unit price, so I thought they were equal — but one was EXW and the other FOB, and I ended up paying far more."
"I agreed to CIF, then only after the goods reached port did I realize domestic transport and duties were still entirely on me."
"They said DDP, so I relaxed — then customs held the shipment and I spent days going back and forth with the factory."

Pick a factory by the unit price at the top of the quote, and this is what happens. Even when the number is the same, if the price covers a different stretch of the journey, the real cost at your warehouse turns out completely different. The agreement that defines "how far" is the Incoterm.

Incoterms aren't obscure trade jargon. They simply fix the point at which cost and risk pass from the factory to you. Compare quotes without knowing that point, and you'll be fooled by a cheap-looking price and bled by the costs you didn't see.

Today we'll focus on the four terms Korean sellers meet most often in China sourcing — EXW, FOB, CIF, and DDP. We'll cover how each one splits cost and risk, which term suits which stage, and what you must standardize when comparing quotes. Read it once before your next quote, and you'll import the same product at a far clearer price.

1. What Incoterms Are — The "Handoff Point" for Cost and Risk

Incoterms are the standard trade terms set by the International Chamber of Commerce (ICC). The name sounds grand, but the core is simple. Over the long journey from the factory to your warehouse, they nail down — in a three-letter code — up to which point each cost is paid, and where the risk of loss passes from the factory to you.

Take the same pair of sneakers: "EXW Guangzhou" and "DDP Incheon" are entirely different prices. The first is the value of handing the goods over at the factory door in Guangzhou; the second is the value of delivering to your warehouse in Incheon with transport, customs, and duties all finished. That's why the same number isn't the same quote.

2. The Four You'll Use Most — EXW, FOB, CIF, DDP

There are 11 Incoterms in the 2020 edition, but Korean sellers usually meet just four in China sourcing. Think of them as the factory's responsibility widening in order: EXW → FOB → CIF → DDP.

Read down the table and the factory shoulders more while the seller has less to handle. But whatever the factory shoulders gets loaded into the unit price. So EXW isn't automatically cheap and DDP isn't automatically expensive — it comes down to whether you can handle the back end yourself, and how honestly the factory loads those costs into the price.

The handoff point in one line

• EXW — "From my door, it's all yours" (max seller burden)
• FOB — "I'll load the ship; the ocean onward is yours" (the sourcing standard)
• CIF — "I'll send it to your port, freight and insurance on me" (clearance onward is yours)
• DDP — "I'll finish everything to your warehouse door" (max factory burden)

3. Where Cost Crosses Over — The Money Line

To use Incoterms well, look at the cost boundary and the risk boundary separately. Cost first. Whichever term you choose, the total cost from factory to warehouse ends up roughly the same. The only difference is whether it's baked into the unit price or paid directly by you to carriers and customs brokers.

Costs the seller pays separately, by term

The table gives the answer. EXW lets the factory quote the lowest unit price, but the string of costs below it all falls on the seller — so the landed cost can be the heaviest. DDP is the reverse. Compare by unit price and the EXW factory wins; line them up by landed cost and the ranking often flips (see Ep.18).

4. Where Risk Crosses Over — Who Pays When Something Breaks

The risk boundary gets overlooked even more than cost. If goods break, get soaked, or the ship has an accident in transit, who eats the loss — that, too, is set by the Incoterm. And the point where risk passes isn't always the same as where cost passes.

When risk passes to the seller

CIF is the most confusing here. Because "Insurance" is in the name, it's easy to assume "the factory is responsible, so I'm safe" — but the insurance the factory buys under CIF is just minimum cover taken out on the seller's behalf. The risk itself already passed to the seller the moment the goods were loaded. If an accident happens, filing the claim ends up being the seller's job.

5. Which Term Suits Which Stage

There's no single "right" term. The best one shifts with the seller's trade experience, volume, and shipping network. Still, following the path Korean sellers tend to grow along gives a rough picture.

Recommended term by experience level

For a seller importing from China for the first time, DDP is the most comfortable. The factory finishes the complex customs and transport, so you can receive the product and get used to the trade itself. That comfort, though, is loaded into the unit price, and it comes with a weakness: you can't control things when customs gets stuck.

As trade becomes familiar and volume grows, sellers usually move to FOB. The factory takes responsibility to the China port, and from the ocean onward your chosen forwarder takes over — so you gain room to compare and trim freight (see Ep.35). That's why FOB is treated as the "standard" in China sourcing.

6. Common Mistakes

Knowing Incoterms isn't the end. There are traps sellers fall into at the contract and quote stage. Here are the mistakes Korean sellers hit again and again with Chinese factories.

Incoterms mistakes to avoid

Nail it in the contract

• Write the term plus the exact place — "FOB Ningbo", "DDP Incheon, XX warehouse," down to the location (see Ep.12)
• State the Incoterms year — write "Incoterms 2020" to block interpretation disputes
• Get cost items itemized in the quote — confirm exactly what the unit price includes
• Check the insurance cover — if CIF, get the policy type in writing

7. The Key to Comparing Quotes — Standardize the Incoterm

Once you have quotes from several factories, the first step in comparison is to line up the Incoterm. Rank quotes with mismatched terms by unit price alone, and the one that looks cheapest may actually be the most expensive. Apples have to sit next to apples.

How to convert to landed cost

Run this conversion once and you'll often find the factory that was 10% cheaper on unit price is actually pricier on landed cost. Some factories quote a low unit price and quietly make it back on shipping and packaging terms (see Ep.38). So the conclusion of quote comparison is always the same: "per unit" isn't the real price; "delivered to my warehouse" is.

8. GreenFrog Seoul's Trade-Term & Logistics Support

Once you grasp the concept, you can use Incoterms yourself. But the China-side transport arrangement, export clearance, and forwarder selection that EXW and FOB deals require — plus converting quotes to landed cost for comparison — need a local network and trade know-how behind them. That's the part GreenFrog Seoul handles with you, or for you.

Support services

What changes when we work together

• The real price — compare factories by landed cost, not unit price
• The right term — design EXW/FOB/DDP around the seller's stage
• Control — switch to FOB to take freight and clearance into your own hands
• A safety net — check insurance cover and clearance requirements upfront to block accidents

9. Incoterms Checklist

Points to check before your next quote or contract.

Quote & comparison stage

• Aligned every factory's quote to the same Incoterm
• Ranked by landed cost, not unit price
• Got the cost items in the unit price itemized
• Added up every cost hidden behind the EXW unit price

Contract stage

• Stated the exact place (port/warehouse) with the term
• Pinned the version, e.g. "Incoterms 2020," in the contract
• Confirmed the insurance cover in writing if CIF
• Checked the import-clearance party and certifications if DDP

Risk check

• Considered a separate marine policy for high-value cargo
• Understood the risk-transfer point for each term
• Prepared the documents and certifications for clearance in advance
• Planned to change the term as the deal matures

Closing — Negotiate the "Landed Cost," Not the Unit Price

The four terms in one line each:

• EXW: value to the factory door. Cheapest when you can control the whole back end
• FOB: value loaded onto the ship. The sourcing standard, with freight in your hands
• CIF: freight and insurance to the port — but the risk is already the seller's
• DDP: all the way to your warehouse door. Easy, but double-check clearance

The core of Incoterms comes down to one thing: a quote's unit price means nothing until you know "the value of how far." The same number under EXW and DDP is a completely different deal, and comparing without grasping that difference drops you into the cheap-looking trap. With your next quote, don't start from the unit price — start by matching the Incoterm. Line up every factory on the same term, add the back-end costs you'll bear, and rank by landed cost; only then does the truly cheaper factory appear. GreenFrog Seoul works alongside Korean sellers — from term design to landed-cost conversion, local logistics, and insurance and clearance checks — so you trade on the real price. If you've got a quote but aren't sure which term is favorable, reach out anytime.