FOB vs EXW: Which Incoterm Should You Use When Importing from China?

EXW (Ex Works) means the seller (factory) makes the goods available at their premises. The buyer is responsible for everything after that — picking up from the factory, inland transport to the port, export customs clearance, ocean freight, import customs, and delivery to your warehouse.

FOB (Free On Board) means the seller handles everything until the goods are loaded onto the vessel at the port of origin. The buyer takes responsibility once the goods are on the ship — ocean freight, import customs, and delivery.

In simple terms:

The critical difference: with EXW, you need to arrange (or hire someone to arrange) pickup from the Chinese factory, inland trucking, and Chinese export customs. With FOB, the factory handles all of that — you only take over once the container is on the ship.

FOB is the standard Incoterm for China exports, and roughly 80% of import orders from China use FOB terms. Here's why:

1. The factory handles Chinese export customs. Export clearance in China requires Chinese documentation, a Chinese customs broker, and knowledge of Chinese export regulations. As a foreign buyer, you don't have the legal entity or expertise to handle this yourself. Under FOB, the factory (or their export agent) takes care of it.

2. Inland logistics in China are the factory's strength. Chinese factories know the best trucking routes from their facility to the nearest port. They have existing relationships with domestic logistics companies and can negotiate better inland freight rates than you could as a foreign buyer.

3. Risk transfer makes sense. Under FOB, the factory bears the risk of damage until the goods are on the vessel. If something happens during inland transport or port handling, it's their problem — not yours.

When you get a "FOB Ningbo" or "FOB Shanghai" quote from a Chinese factory, it means the price includes the product, packaging, inland transport to that port, and export clearance. You arrange and pay for ocean freight from that port to your destination.

EXW prices look cheaper because they only cover the product at the factory gate. But the "savings" is misleading — you're just moving costs from the product price to your logistics bill. And often, your total cost ends up higher than FOB because you can't match the factory's inland logistics rates.

When EXW makes sense:

• You have your own freight forwarder with a strong China network who can handle inland pickup, trucking, and export customs
• You're consolidating shipments from multiple factories into one container — your freight forwarder picks up from each factory and combines at a warehouse near the port
• The factory is very small and doesn't have export experience (rare, but it happens with some domestic-focused manufacturers)

When EXW doesn't make sense (most cases):

• You don't have a Chinese freight forwarder — you'd need to find one, and they'll charge you for the inland logistics that the factory could have done cheaper
• You're new to importing and don't understand Chinese export customs requirements
• Single-factory orders where there's no consolidation benefit

Important legal note: Under EXW terms, the buyer is technically responsible for export clearance. But in China, foreign buyers cannot legally clear exports through Chinese customs. In practice, the factory or their agent still handles the actual customs declaration, but the cost and risk sit with the buyer. This legal ambiguity is another reason FOB is preferred.

Let's compare the total landed cost for a typical order of 500 cartons shipped from a factory in Ningbo to Los Angeles:

In this example, EXW saves $550 — but requires you to coordinate inland logistics, find a Chinese customs broker, and accept more risk during inland transport. For most importers, the 2% savings isn't worth the added complexity and risk. FOB is the simpler, safer choice for most China imports.

While FOB and EXW dominate China sourcing, you may encounter these terms:

CIF (Cost, Insurance, and Freight): The seller pays for everything up to the destination port, including ocean freight and insurance. Common in commodity trading. The price looks higher, but you don't arrange ocean freight. Useful when the factory has better shipping rates than you, but you lose control over carrier selection.

DDP (Delivered Duty Paid): The seller handles absolutely everything — including import customs and duties in your country. Most convenient for the buyer, but rare in China sourcing because Chinese factories don't typically have entities to handle foreign import clearance. Some trading companies and sourcing agents offer DDP terms.

DAP (Delivered at Place): Similar to DDP, but the buyer handles import customs. The seller arranges everything up to your specified delivery address.

For most China imports, stick with FOB unless you have a specific reason to use another term. It's the industry standard, factories understand it, and it provides a clean division of responsibilities.

Whichever Incoterm you use, always verify the factory first. A great shipping deal means nothing if the factory doesn't have the production capacity they claimed. Use government data verification to confirm factory legitimacy before negotiating terms.