# Incoterms Guide: The Rules of Shipping
When you sit at a booth at the Canton Fair and ask for a price, the factory rep will pull out a calculator and say "$5.00."
You must immediately ask: **"Is that FOB or EXW?"** If you do not understand these three letters, you will lose your profit margin to hidden shipping and customs fees.
> **💡 Withyou Trip Expert Verdict:**
> "The biggest mistake new buyers make is accepting an **EXW (Ex Works)** quote without having a local Chinese sourcing agent. EXW means the factory's responsibility ends the second the goods leave their warehouse door. You are responsible for hiring a truck, driving it to the Shenzhen port, and, critically, filing the Chinese export customs paperwork. If you don't have a Chinese export license, your goods cannot legally leave the country. You must negotiate for **FOB (Free on Board)**."
## 1. The Critical Incoterms Matrix
| Incoterm | Factory Responsibility | Buyer Responsibility | Best For |
| :--- | :--- | :--- | :--- |
| **EXW (Ex Works)** | Manufacture the goods. | Trucking to port, Export Customs, Ocean Freight. | Buyers with a Sourcing Agent in China. |
| **FOB (Free on Board)**| Export Customs + Load onto Ship. | Ocean Freight + Import Customs. | 🟢 **The Global Standard.** FCL Shipments. |
| **CIF (Cost, Insurance, Freight)**| Ship to your home port. | Unload at port + Import Customs. | Not recommended (hidden port fees). |
| **DDP (Delivered Duty Paid)**| Everything. Delivered to your door. | Nothing. Just pay the invoice. | 🟢 E-commerce (Amazon FBA) sellers. |
## 2. The Danger of CIF (The Hidden Fee Trap)
Many buyers think CIF is great because the factory handles the ocean freight.
* **The Trap:** The factory will use their own cheap freight forwarder. The ocean freight seems cheap on the invoice. However, when the ship arrives in Los Angeles, the US "destination agent" will hit you with thousands of dollars in absurd "handover fees" before releasing the container.
* **The Fix:** Always control your own freight. Buy FOB, and hire your own freight forwarder in your home country to book the ship.
## 3. DDP for E-Commerce Sellers
If you sell on Amazon or Shopify and do not want to deal with US/EU customs, DDP is the ultimate luxury.
* The factory (or their trading partner) quotes a single, higher price per unit that covers the manufacturing, the ocean freight, the import duties, and the final FedEx delivery to the Amazon warehouse.
* While you pay a premium for DDP, it is the only way for small solo-entrepreneurs to avoid the massive headache of securing a US Customs Bond and dealing with port authorities.
## ❓ Frequently Asked Questions (FAQ)
**Q: Do factories at the Canton Fair quote in USD or RMB?**
A: They will almost always quote foreign buyers in **USD (US Dollars)**, and the quote will usually be based on FOB Shenzhen or FOB Guangzhou terms. Always double-check which specific port the FOB term applies to, as trucking from a remote factory to the port can be expensive.