1. Why These Terms Matter?

These Shipping Terms Matter because It:

• Determine who pays for transport, insurance, duties.
• Clarify when your risk begins (e.g., once goods leave China vs once they arrive).
• Avoid hidden costs or disputes with your supplier.

These terms are not just legal jargon—they directly impact your landed cost, delivery timeline, and margin. The rules are published by the International Chamber of Commerce (ICC) and represent standard global practice. (Source: trade.gov)

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2. Key Trade and Shipping Terms (with definitions)

Most Common Terms & What They Mean

Term	Full Form / Meaning	Definition / Explanation
EXW	Ex Works	Buyer collects goods from seller’s premises and bears all costs and risks for transport, export, and import.
FCA	Free Carrier	Seller delivers goods to the carrier chosen by buyer at a named place; risk transfers to buyer there.
FAS	Free Alongside Ship	Seller places goods alongside the vessel at port; buyer handles loading and subsequent transport.
FOB	Free On Board	Seller loads goods onto the vessel; buyer handles sea freight, insurance, and import duties.
CFR	Cost and Freight	Seller pays cost and freight to destination port, but risk transfers once goods are loaded.
CIF	Cost, Insurance & Freight	Seller covers cost, freight, and minimum insurance to destination port; buyer handles import clearance.
CPT	Carriage Paid To	Seller pays transport to named destination; buyer assumes risk once goods handed to first carrier.
CIP	Carriage & Insurance Paid To	Seller pays transport and insurance until named destination; buyer covers import duty and risk afterward.
DAP	Delivered At Place	Seller delivers goods ready for unloading at destination; buyer handles customs and import taxes.
DPU	Delivered at Place Unloaded	Seller delivers and unloads goods at destination; buyer handles import formalities.
DDP	Delivered Duty Paid	Seller manages everything — shipping, duties, customs, delivery to buyer’s address. Buyer simply receives goods.

Important Logistics and Freight Terms

Term	Full Form / Meaning	Definition / Explanation
B/L or BOL	Bill of Lading	Legal document from carrier confirming goods received for shipment.
AWB	Air Waybill	Air transport document confirming cargo details; non-negotiable.
FCL	Full Container Load	Entire container booked by one shipper for one consignee.
LCL	Less than Container Load	Multiple shipments consolidated into one container.
CBM	Cubic Meter	Measurement of shipment volume (L×W×H in meters ÷ 1,000,000).
ETA / ETD	Estimated Time of Arrival / Departure	Expected time of arrival or departure for a vessel or shipment.
POL	Port of Loading	Port where goods are loaded onto a vessel.
POD	Port of Discharge / Proof of Delivery	Port where goods are unloaded / or confirmation of receipt by consignee.
CFS	Container Freight Station	Facility for consolidating or de-consolidating LCL shipments.
CY	Container Yard	Port storage area for full containers awaiting shipment or pickup.
COO	Certificate of Origin	Document certifying the country where goods were manufactured.
MSDS	Material Safety Data Sheet	Document detailing safe handling of chemical or hazardous materials.
EORI	Economic Operator Registration & Identification	Registration number required for import/export in the EU.
ISF	Importer Security Filing	U.S. requirement: shipment data must be filed before cargo loading.
3PL	Third-Party Logistics	Outsourced logistics provider managing shipping or warehousing.
4PL	Fourth-Party Logistics	Logistics integrator overseeing multiple 3PLs to optimize entire supply chain.
MOQ	Minimum Order Quantity	Smallest production or purchase quantity accepted by supplier.
PO	Purchase Order	Buyer’s official order confirming purchase details with supplier.
PI	Proforma Invoice	Preliminary invoice issued before shipment for payment/customs.
SKU	Stock Keeping Unit	Unique product code used for inventory tracking.

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3. How to Choose the Right Term for You

Different businesses, products, target markets require different terms.

• For importers who want minimal risk: Choose DDP or DAP.
• For buyers who handle freight & customs themselves: EXW or FOB may give lower price but higher responsibility.
• For mixed risk sharing: CIF or CPT may work.
  • Tip: Always clarify in contract the exact point of delivery, named place, and responsibilities.

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4. Common Mistakes & What to Avoid

• Not specifying the “named place” (e.g., FOB Shanghai vs FOB “factory”)
• Ignoring who pays import duties/taxes (especially in DDP)
• Assuming insurance is included when it isn’t (in terms like FOB or EXW)
• Using the wrong term for the transport mode (some terms are only valid for sea vs and not for other modes of transportation).

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5. Practical Checklist for Your First Sourcing Order

• Confirm Incoterm and named place in your purchase order
• Get a breakdown: cost of goods, freight, insurance, duties
• Clarify delivery time, payment terms, inspection checkpoints
• Ensure transport documents (B/L, AWB) align with term responsibility
• Keep backup plan for import duties or customs hold-ups

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6. Why Use China Wholesale Hub for Shipping & Sourcing

• We connect you with verified Chinese factories, helping you choose the best shipping term for your supply chain.
• Our logistics team provides options under different Incoterms so you can decide how much risk or cost you want to handle.
• We provide transparent cost breakdowns, support on customs paperwork, and help with freight consolidation.

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7. Frequently Asked Questions about Shipping Terms

1. What are shipping terms or Incoterms?

Shipping terms (also called Incoterms, short for International Commercial Terms) are standardized trade rules that define the responsibilities of buyers and sellers in global shipping. They clarify who pays for freight, insurance, duties, and when risk transfers from seller to buyer.

2. What’s the difference between FOB and CIF?

FOB (Free On Board): Seller delivers goods onto the ship; buyer handles freight, insurance, and import costs.
CIF (Cost, Insurance, and Freight): Seller pays freight and insurance up to the destination port; buyer takes over after arrival.
✅ CIF is more convenient but usually costs slightly more.

3. Which shipping term is best for first-time importers?

For new importers, DDP (Delivered Duty Paid) or DAP (Delivered at Place) are the safest.
Under these terms, the seller handles almost everything — from shipping and insurance to customs clearance — so you just receive the goods at your warehouse or doorstep.

4. What’s the riskiest shipping term for buyers?

EXW (Ex Works) puts almost all responsibility on the buyer. You must handle pickup, export clearance, freight, and import customs.
It’s usually the cheapest option but only recommended if you have reliable freight partners.

5. Who pays customs duties and taxes under DDP?

In Delivered Duty Paid (DDP), the seller pays all import duties, taxes, and clearance costs in the buyer’s country.
That’s why DDP prices appear higher — everything is included.

6. Can I change the shipping term after the contract is signed?

Usually no, unless both buyer and seller agree in writing.
Changing an Incoterm affects cost, insurance, documentation, and legal liability — so it must be updated on the invoice, bill of lading, and purchase order if revised.

7. Do all shipping terms include insurance?

No. Only CIF (Cost, Insurance & Freight) and CIP (Carriage & Insurance Paid To) require the seller to provide minimum insurance.
Under other terms (like FOB or EXW), the buyer arranges their own insurance.

8. What’s the difference between DDP and DAP?

DDP (Delivered Duty Paid): Seller pays import duties, taxes, and delivers goods to your address.
DAP (Delivered At Place): Seller delivers to destination, but buyer handles customs and import taxes.

9. What does “named place” mean in shipping terms?

Each Incoterm should specify a named place or port, e.g., “FOB Shanghai Port” or “CIF Los Angeles.”
It defines exactly where risk transfers — omitting it causes disputes and confusion about responsibility.

10. What’s the difference between FCL and LCL shipping?

FCL (Full Container Load): You book an entire container. Safer and faster for large shipments.
LCL (Less than Container Load): Multiple shippers share one container. Cheaper for small volumes but may take longer due to consolidation.

11. Is air freight better than sea freight?

Air freight is faster and more reliable for small or urgent shipments but costlier.
Sea freight is ideal for bulk cargo and heavy goods — slower but much cheaper per unit.

12. What are the most common mistakes buyers make with shipping terms?

• Not mentioning the Incoterm year (e.g., Incoterms 2020)
• Forgetting to name the port/place (e.g., “FOB China” instead of “FOB Ningbo”)
• Assuming insurance or customs is included when it isn’t
• Mixing terms incorrectly (for example, “CIF Air Freight,” which is invalid — CIF applies only to sea transport)

13. Where can I learn more about Incoterms?

You can visit the International Chamber of Commerce (ICC) official website for detailed definitions:
👉 https://iccwbo.org/resources-for-business/incoterms-rules

About ChinaWholesaleHub

ChinaWholesaleHub is a factory-focused global sourcing platform that connects international buyers directly with verified Chinese manufacturers for OEM/ODM production and factory-direct pricing. We vet export-ready factories, simplify communications, and provide end-to-end sourcing support — from supplier checks and sample coordination to quality control and logistics — so brands, retailers, and importers can scale with confidence and lower costs while retaining full control over product design and supply chain.