Incoterms 2020 for Electronics Importers: EXW, FOB, CIF, DDP and How to Choose When Buying from China

Every quotation from a Chinese factory carries three or four letters after the price: USD 6.80 FOB Shenzhen, USD 7.35 CIF Rotterdam, USD 8.90 DDP Amazon FBA. Those letters are Incoterms, the trade rules published by the International Chamber of Commerce. The current version, Incoterms 2020, has been in use since 1 January 2020, and there is no newer edition in force. Pick the wrong term and a cheap unit price can turn into an expensive landed cost, or into a container stuck at port while nobody agrees who should pay the demurrage.

This guide explains the six terms you will meet most often when buying wireless microphones, voice amplifiers, AI gadgets and other consumer electronics from China, shows how cost and risk move under each, works through a landed-cost example, and gives a simple way to choose. It is written from the factory side: we quote these terms every week at Shiya, and we see where buyers get surprised.

What an Incoterm does and does not cover

An Incoterm is a short code that answers three questions:

• Costs: who pays for each step, from loading at the factory to delivery at your warehouse.
• Risk: the exact point at which loss or damage becomes the buyer's problem.
• Formalities: who handles export clearance in China and import clearance in your country.

It does not cover payment terms (30% deposit, 70% before shipment, or a letter of credit), transfer of ownership, product quality, warranty or what happens if the goods do not match the sample. Those belong in your purchase order or sales contract. A common mistake is assuming that "the seller is responsible until the goods arrive" under CIF. Under CIF the seller pays freight to your port, but risk has already passed to you when the goods were loaded on the ship in China.

Always name the term, the place and the version together, for example "FOB Yantian, Incoterms 2020" or "DAP Hamburg warehouse, Incoterms 2020". A term without a precise place causes most Incoterm disputes.

The six terms electronics buyers use most

EXW: Ex Works

The factory makes the goods available at its own premises, and the buyer does everything else: loading, export clearance, freight, insurance and import. EXW gives the lowest quoted price, but it is rarely the lowest real cost for an overseas buyer. A foreign company usually cannot handle Chinese export customs itself, so your forwarder has to arrange it, and there is often confusion about who loads the truck. EXW makes sense mainly for samples collected by courier or when your own forwarder already consolidates goods from many suppliers in Shenzhen.

FCA: Free Carrier

The seller clears the goods for export and hands them to the carrier you nominate at an agreed place, typically your forwarder's warehouse in Shenzhen or the factory gate. Risk passes at that handover. FCA works for every transport mode, which makes it the right choice for air freight, express and consolidated (LCL) sea shipments. Incoterms 2020 added an option that lets the buyer instruct its carrier to issue an on-board bill of lading to the seller, which helps when you pay by letter of credit.

FOB: Free On Board

The seller clears export and loads the goods on the vessel your forwarder has booked at the named port, for example Yantian or Shekou. Risk passes once the goods are on board. FOB is the most quoted term for full containers from South China and the default most factories expect. Strictly, FOB is for sea and inland waterway transport only. For containers handed over at a terminal before loading, the ICC recommends FCA, though in practice FOB Shenzhen remains very common.

CFR and CIF: Cost and Freight / Cost, Insurance and Freight

The seller books and pays sea freight to your destination port, and under CIF also buys insurance. Risk still passes when the goods are loaded on board in China. Two points matter:

• The seller chooses the shipping line and the freight forwarder, and destination charges (terminal handling, delivery order fees) are often higher with a forwarder the seller chose than with one you appointed yourself.
• CIF only requires minimum insurance cover, Institute Cargo Clauses (C), at 110% of the invoice value. That cover excludes many common losses. If insurance matters, ask for all-risks cover in writing or insure the goods yourself.

CIP: Carriage and Insurance Paid To

Like CIF but valid for any mode, including air. Under Incoterms 2020, CIP requires all-risks cover, Institute Cargo Clauses (A), unless the parties agree otherwise. Risk passes when the goods are handed to the first carrier in China.

DAP and DDP: Delivered at Place / Delivered Duty Paid

Under DAP the seller delivers to a named place in your country, ready for unloading, and you handle import clearance and duties. Under DDP the seller also clears import and pays duties and import taxes. Risk passes at the destination. DDP is popular with Amazon sellers and small importers because the price is all-inclusive, but there are trade-offs: the seller must be able to act as importer of record, VAT you would normally recover may be lost, and some logistics providers declare values in ways that leave you exposed if customs audits the shipment. Ask exactly how the shipment will be declared and whose name will appear as importer.

Comparison table: cost and risk by term

Worked example: landed cost of 2,000 voice amplifiers

Quoted unit prices only compare well when you turn them into a landed cost per unit, delivered to your warehouse. Here is an illustrative calculation for 2,000 wireless voice amplifiers shipped by sea in a consolidated (LCL) shipment of about 6 m³ from Shenzhen to a European port. The figures are examples to show the method, not current rates or duty rulings. Use real quotes from your forwarder and your customs broker.

In this example, FOB with your own forwarder is cheapest, CIF is close but carries higher destination fees and weaker insurance, and DDP costs about 12% more for the convenience of a single price. Import VAT is left out because many businesses recover it; under DDP it may be built into the price and not be recoverable. Note that customs value in the EU is normally based on CIF value, while the US uses the transaction value excluding international freight, which is one reason duty lines differ between markets.

Special points for battery-powered electronics

Wireless microphones, voice amplifiers and AI printers almost always contain lithium-ion batteries. That affects your Incoterm choice in three ways:

• Carrier acceptance. Not every airline, express service or LCL consolidator accepts battery cargo. Under FCA or FOB your forwarder must confirm acceptance; under CIF, CIP or DDP the seller's forwarder must.
• Documents. The UN38.3 test summary, SDS and, for many Chinese airports and ports, a transport appraisal report must be ready before the booking. Agree in the contract that the factory supplies them, whatever the term. Our guide to shipping lithium-battery electronics from China lists them in detail.
• Packing and marks. Battery handling labels and packing methods are the shipper's responsibility at origin, so they belong to the seller under every term except EXW. Make it explicit.

How to choose the right term

1. Do you have a reliable forwarder? If yes, buy FOB (full containers) or FCA (air, express, LCL). You control cost, schedules and the destination agent.
2. Is this a first or small order, or are you shipping straight into Amazon FBA? DDP or DAP with a clear declaration method reduces your workload. Compare at least one DDP quote against an FOB plus forwarder quote.
3. Are you paying by letter of credit? Use FOB or CIF by sea, or FCA with the on-board bill of lading option, so the documents match what the bank requires.
4. Is the cargo high-value? Avoid relying on CIF's minimum insurance. Choose CIP, or buy FOB/FCA and insure all-risks yourself.
5. Is the timing critical? Choose a term where you control the booking (FCA or FOB), especially before peaks such as Q4 and Chinese New Year. See our China electronics sourcing calendar.

Common mistakes to avoid

• Naming a city, not a place. "FOB China" or "DAP Germany" is not enough. Name the port, terminal or warehouse address.
• Mixing up risk and cost. Under CFR and CIF, the seller pays freight but you carry the risk at sea. Make sure insurance covers you.
• Ignoring destination charges. Low or "zero" CIF freight is sometimes recovered through high destination fees charged to you.
• Using DDP without checking the importer. If the seller cannot legally act as importer of record, the shipment may be held, or you may become liable for under-declared duties.
• Forgetting that Incoterms do not cover quality. Pre-shipment inspection should happen before risk passes. Our AQL inspection guide explains how to set it up.

How Shiya quotes

We quote EXW and FOB Shenzhen by default for our voice amplifiers, wireless lavalier microphones and AI smart devices, and can provide CIF, DAP or DDP quotes through partner forwarders for many destinations, including Amazon FBA warehouses. UN38.3, SDS and battery-compliant cartons are included as standard for battery products. Tell us your destination, order quantity and preferred term on the inquiry form and we will return a quote you can compare line by line.

Frequently asked questions

Which Incoterm is best for buying electronics from China?

For most importers with a forwarder, FOB Shenzhen for full containers and FCA for air, express or LCL shipments. Both put export clearance on the factory while you control freight, insurance and destination costs. Small buyers without a forwarder often choose DDP.

Is CIF cheaper than FOB?

The quoted price is higher, but it includes freight and minimum insurance. Total landed cost is often similar or higher, because destination charges under a seller-arranged CIF shipment can be expensive. Compare full landed costs, not unit prices.

When does risk pass to the buyer under FOB?

When the goods are loaded on board the vessel at the named port of shipment in China. From that moment, loss or damage is the buyer's risk, which is why the buyer should arrange cargo insurance.

Is there an Incoterms 2030 or a newer version than 2020?

Incoterms 2020 is the current version. The ICC has been working on the next revision, but until it is published and parties choose to use it, contracts should state "Incoterms 2020".

Can I use DDP for Amazon FBA shipments?

Yes, many sellers do. Make sure the provider can act as importer of record or uses your import account correctly, declares the real value, books an FBA delivery appointment and supplies the documents Amazon needs for battery products.