When planning wholesale purchases from China, it is essential to understand delivery terms: they determine who is responsible for transportation, customs clearance, and related costs.
What FOB and EXW delivery terms are
FOB (Free on Board)
“Free on Board” — a delivery term under which the supplier is responsible for the goods only until they are delivered to the port. Once the cargo is loaded onto the vessel, responsibility passes to the buyer.
Key features of FOB:
- The seller is responsible for transporting the cargo to the port and loading it onto the vessel
- The buyer is responsible for delivery of the cargo and its condition
- Used for sea and inland waterway transport
- Considered a cost-effective option for large wholesale shipments
EXW (Ex Works)
All costs and responsibility for transportation pass to the buyer once the goods are collected from the seller’s warehouse or factory.
Key features of EXW:
- The seller only prepares the goods and makes them available at its premises
- The buyer must arrange and pay for transport and complete the customs paperwork independently
- Suitable for experienced buyers
Key differences between FOB and EXW
| Criterion | FOB | EXW |
|---|---|---|
| Seller’s responsibility | Transport to the port and loading onto the vessel | Goods preparation only |
| Buyer’s responsibility | Transport, insurance, and formalities | The full delivery process |
| Costs | More expensive, but simpler | Cheaper, but more complex |
| For beginners | Suitable | Requires experience |
What risks are associated with FOB and EXW
Risks of using FOB
- Delays at the port are possible if the seller fails to meet its export obligations
- Additional terminal charges may apply
- Documents must be checked carefully before shipment
Risks of choosing EXW
- The buyer bears all transportation costs and customs formalities
- Without reliable logistics partners, arranging cargo collection can be difficult
- The risk of extra costs due to incorrect customs clearance increases
Which option to choose: FOB or EXW
- If you lack experience, FOB. The seller will take on some of the obligations.
- If you have trusted logistics partners, you can choose EXW. It lets you control the entire process and reduce costs.
- For small consignments, EXW may prove uneconomical because of high logistics costs.
Important: choosing an Incoterms rule and the risk of cargo schemes
When purchasing in China, it is better to choose EXW, FCA, or FOB — these terms allow the buyer to choose the carrier. If the Chinese supplier is given that choice, it will choose cargo shipping because it is cheaper. Cargo shipping is smuggling.
BoxCargo: help choosing delivery terms
The company BoxCargo helps importers choose the right Incoterms rule and arrange logistics from China. We handle purchasing, consolidation, customs clearance, and delivery to a warehouse in Russia.
- Phone: 8 800 222-47-56
- Email: sales@boxcargo.ru
- Office: Victory Park Business Center, 2Zh Minskaya St., Moscow
- Website: boxcargo.ru
Free consultation — we will help you choose the right delivery terms.