Are you familiar with the shipping terms from China? If not, don’t worry. Here I will introduce the incoterms for shipping from China to other countries. But maybe you do not know which to choose. However, here are many factors to consider to do a sales transaction from China successfully. You can refer to ddpch.com that helps you in this process.
Ddpch gives many services consisting of product research, quality control, shipping, customs clearance of goods and home delivery. You just buy and contact us and we do everything. So you do not have to deal with the terms of shipment. But you may be eager to know about the incoterms for importing from China. Here I discuss all the Incoterms and introduce the best one.
Import shipping terms from China; FOB
Do you the meaning of it? You may be surprised if I tell you that it means ‘Free on Board’, and refers to a commonly used Incoterm (International Commercial Terms). While Incoterms are the protocols international trade and responsibility between the supplier and buyer. FOB trade terms are the most used to import products from China to the UK. Under these shipping terms, the seller is responsible for all costs involved in the delivery process until the goods are at the designated port.
At ddpch, we do our best that you receive the best delivery quote. As experts in the freight industry, we offer the best benefits for all.
But some people do not know the responsibility of the suppliers in shipping from China. They think that the supplier is only responsible for half the journey. So here I want to inform you about the costs your supplier should cover:
When you import from China, there are shipping documents that must be produced for your goods which can cost up to £60.00.
Entry summary declarations
The Entry Summary Declaration (ENS) is the cost that should be paid by the supplier.
Terminal handling charge
The terminal handling charge (THC) is the cost of loading the goods at the relevant port in China.
Don’t forget that the suppliers should have licenses to export products.
When your goods have been cleared through a series of customs checks in the country of origin, you need a customs clearance agent in order to dictate the costs of the process for leaving or entering the country.
The transportation cost includes the fee to send your goods.
The supplier should send the shipping documents by electronic release. Without this release, you cannot claim your goods.
Ex Works Shipping Terms
Ex Works shipping terms are Incoterms that require the importer pay all costs involved in shipping from the supplier to your home. Remember that the buyer is responsible for the Ex Works shipping terms, and not split like FOB terms.
CIF/CFR Shipping Terms
Both CIF/CFR (Cost, Insurance and Freight/Cost and freight) are incoterms that the supplier is responsible for the safe arrival of the goods until they arrive at the desired destination port. Remember that these two shipping terms are exactly the same, except that CIF is offered with minimal insurance.
In both CIF and CRF shipping terms, the seller’s invoice must include the cost of the goods for shipping from China. They will pay the freight to the destination port, and the buyer will pay for the terminal handling at the port.
Benefits of FOB Terms
By using FOB terms, you have full control from purchase to delivery. So the buyer has the power to control the costs as hidden or unexpected fees.
Which incoterm is best for buyer?
Here are the best Incoterms for buyers:
- FOB (Freight on Board): The seller/exporter will leave the goods at the port of origin, and ready for international transport. It is free on board from China. FOB price covers product cost, local exporting fees, delivery of your order to the port.
- EXW (Ex Works): The EXW Incoterm is also a good choice.
- DAP( Delivered at Place).
- Which is the best FOB or CIF?
By using CIF, when the goods reach the destination, the buyer will be responsible.
- Most of the time, we offer FOB to buyers and CIF to sellers. FOB saves buyers’ money and provides control, but CIF provides more profit for the seller.
Importing from China: FOB, CIF, or EXW Incoterm?
Choosing the incoterm affects greatly the whole cost. If the lowest sale price is more important for an importer, it will lead to a very costly mistake. So here we provide a closer look at choosing the incoterm regarding the import costs.
Price of product depends on Incoterm
The price depends on if you’re importing with the FOB Incoterm, CIF Incoterm, or EXW Incoterm. Many Chinese suppliers apply the cost of the freight directly to the product price.
Note: the price is not always related to the price of the ocean freight rate. So suppliers want the buyer to choose a certain Incoterm that benefits the supplier more. We explain it in more details after discussing the CIF Incoterm.
Incoterms determine the amount of control you have
Incoterms determines your control over the shipment. The one that has control over the ocean freight will have control over costs and higher bargaining power.
If you accept that your supplier manages the ocean freight, you must accept the price and conditions that he has agreed upon with his freight forwarder.
We recommend FOB, since you have more control over the importing freight shipment without any responsibilities.
The FOB Incoterm
- Buyer’s responsibilities: Pay for the cargo, ocean freight, insurance, arrival fees, customs clearance at destination, inland transportation fees at destination from port, and all corresponding tariffs and taxes.
- Seller’s responsibilities: Deliver the goods based on the conditions agreed with the buyer, provide the necessary certificates, manage inland transportation in China, manage customs clearance and pay the corresponding customs fees in China, and port expenses at origin.
Therefore, under the FOB Incoterm, the importer is responsible for paying, hiring, and managing the ocean freight shipment. By choosing the FOB Incoterm, you, as the buyer, can:
- Choose the carrier, route, and transit time
- Talk with the freight forwarder
- Pressure the seller to lower his price
- Lower costs by reducing your tax
- Have control over your overall costs. There are fewer responsibilities with the FOB Incoterm than the EXW Incoterm.
FOB vs EXW for importing from China
The merit of importing from China with FOB is the control you have. Compared with EXW, you have fewer responsibilities.
With FOB, your responsibilities as an importer are the freight rate, arrival costs, and delivery. By using EXW, you’re responsible for any problems and unanticipated fees.
But both the FOB and EXW Incoterms are safe for the importer, and the difference is just related to the responsibilities. So I recommend FOB since unlike the EXW, it is cheaper with less responsibilities.
Importing from China with the CIF Incoterm
- Buyer’s responsibilities: Paying for the cargo, arrival fees, customs clearance at destination, inland transportation fees at destination from port, and import taxes.
- Seller’s responsibilities: transporting the goods according to the conditions agreed with the buyer, obtaining the documents needed for the export, doing inland transportation in China, managing customs clearance and paying customs fees in China, hiring and paying for the ocean freight, insurance.
- A novice importer may be cheated by the options of no freight payment, no responsibilities in choosing a freight forwarder, no having to organize the freight shipment and the business is cheaper than other incoterms in CIF.
But do not use CIF Incoterm for any import since it limits your control over costs. When you import from China, the choice of CIF increases your overall costs. Since you have to hire an agent at destination to manage customs clearance.
Therefore, as the buyer, you have to pay for additional destination expenses. So for importing from China, I recommend FOB over CIF if you work with a supplier that you do not know or can’t trust.
Importing from China with the EXW Incoterm
- Buyer’s responsibilities: Paying for the cargo, doing the inland transportation at origin and destination, paying for departure and arrival fees, the ocean freight, insurance, managing customs clearance and paying fees and the duties.
- Seller’s responsibilities: Delivering the goods based on the conditions agreed with the buyer, providing all the required documents and certificates.
The main merit of importing from China by using the EXW Incoterm is that you can have control of managing the shipment from start to end. But it also has a disadvantage because you have more responsibilities. By using it, you’re responsible for everything and anything that happens in China.
Remember that any problem can happen. Some of the problems include inland transportation, container loading, customs clearance, etc
Another important issue that you should notice in importing from China with the EXW Incoterm is the physical distance and cultural differences. Hiring services in a country that you are not present is risk. Besides, because of the language, cultural and time differences, there will be more problems as you are not always available to reply to events that may happen.
What’s the best Incoterm when importing from China?
FOB, CIF, and EXW are good choices for your import from China. Each has a different amount of risk, responsibility, cost, and security. I recommend choosing the one that gives you the most control over the ocean freight shipment. So feel free to contact us if you do not know which one to choose.