Incoterms explained: FOB, CIF, and EXW when importing from China
23 August 2026 · 9 min read
Why three letters on a quote decide your real price
Ask a Chinese factory for a price and the number you get back means nothing until you know the Incoterm attached to it. The same benchtop set quoted at "USD 12,000 EXW" and "USD 12,000 CIF Sydney" are not the same deal. One is the price at the factory roller door with every freight, clearance, and delivery cost still ahead of you. The other already includes ocean freight to an Australian port. Get the term wrong and you either double-count costs and walk away from a good order, or under-budget and get surprised at the wharf.
Incoterms are the international rules that define exactly where the seller's responsibility ends and yours begins: who pays freight, who carries the risk if the container goes overboard, and who handles export and import clearance. For a builder importing from China, three come up again and again: EXW, FOB, and CIF. This guide explains what each includes, why FOB is almost always the right default, and how the choice changes your landed cost. Treat the duty and tax figures here as planning ranges and confirm them with a licensed customs broker.
The Incoterms that matter for a China import
There are eleven Incoterms in the 2020 rules, but a builder sourcing materials from China realistically deals with three, plus one to be wary of.
| Incoterm | Seller covers | You cover | Risk passes to you |
|---|---|---|---|
| EXW (Ex Works) | Goods packed at the factory | Everything else, including Chinese export clearance | At the factory door |
| FOB (Free On Board) | Goods, export clearance, delivery to the port and loading | Ocean freight, insurance, and the whole Australian side | Once loaded at the Chinese port |
| CIF (Cost, Insurance, Freight) | The above plus ocean freight and minimum insurance to the destination port | Import clearance, duty, GST, port and delivery charges | Once loaded at the Chinese port |
| DDP (Delivered Duty Paid) | Everything, door to door, including Australian duty and GST | In theory nothing | At your door |
EXW, FOB, and CIF describe a staircase: each step moves more of the cost and the arranging onto the seller. DDP sits at the far end and looks tempting because the seller handles it all, but for building materials it usually causes more problems than it solves, for reasons below.
EXW, FOB, and CIF: what each one really includes
EXW (Ex Works) is the barest price. The factory makes the goods available packed at its premises, and from that moment everything is yours to arrange and pay for: inland trucking to the port, Chinese export declaration, terminal handling, ocean freight, insurance, and the entire Australian import leg. It gives you full control and the cleanest view of every cost, but you need a freight forwarder with an agent in China to manage the export side, because export clearance is your problem under EXW. For most builders it is more moving parts than it is worth.
FOB (Free On Board) is the workhorse of China trade. The factory delivers the goods cleared for export and loaded at a named Chinese port, for example FOB Ningbo. From there the ocean freight, insurance, and the Australian side are yours. The advantage is that you get a clean goods-plus-local-China price, and you (or your forwarder) control and can see the cost of the freight leg. When people say "get an FOB price" they mean this: a price you can compare cleanly between factories because it stops at the same point.
CIF (Cost, Insurance, Freight) adds the ocean freight and marine insurance to the destination port onto the seller's account, for example CIF Sydney. It looks convenient and can look cheaper at a glance, but two things are worth knowing. First, you still handle and pay for the entire Australian side: customs clearance, duty, GST, port charges, and delivery to site. CIF is not door to door. Second, the insurance a seller must provide under CIF is only the minimum level of cover, which is limited, so you may want to arrange your own broader marine cargo insurance regardless.
A technical footnote that rarely bites in practice: FOB and CIF were written for goods loaded over a ship's rail, so strictly they suit bulk cargo, and the 2020 rules nudge container shippers toward FCA and CIP instead. In real China container trade almost everyone still quotes and books FOB and CIF, and forwarders handle it smoothly. It is worth knowing the purist distinction exists, but you will not be the one to change the market's habit.
Why FOB is the builder's default
For a builder importing building materials, FOB is the right starting point in almost every case, for a few concrete reasons.
- Clean comparison. An FOB price stops at the Chinese port, so two factory quotes are comparing the same thing. An EXW quote and a CIF quote for the same goods look wildly different even when the factory price is identical.
- You control the freight. Under FOB you choose the forwarder and the shipping line, you can consolidate several suppliers into one container, and you see the true freight cost rather than a number buried in the goods price. Under CIF the seller picks the freight and books it with their agent, and any margin they add is invisible to you.
- You control the insurance. CIF only obliges the seller to buy minimum cover. Arranging your own marine cargo insurance means you set the level and know exactly what is covered, which matters for fragile categories like glass and stone.
- Fewer surprises at the wharf. With FOB and your own forwarder, the Australian charges are quoted to you directly, so the landed cost is built up transparently rather than revealed after the container lands.
The one time CIF earns its place is a small, single-supplier order where you would rather the factory just get it to an Australian port and you do not want to manage the freight booking. Even then, confirm what the CIF price does and does not include in writing, because it never includes the Australian duty, GST, and delivery.
A worked landed-cost comparison
The clearest way to see why the Incoterm matters is to hold the goods constant and change only the term. Say a factory offers a consolidated order of cabinetry and tapware with a goods value of $20,000, shipped in a shared container, duty nil under the China Australia Free Trade Agreement.
| Cost line | Under EXW | Under FOB | Under CIF |
|---|---|---|---|
| Factory goods price | $20,000 | $20,000 | $20,000 |
| Inland China transport and export clearance | you pay, ~$400 | included | included |
| Ocean freight and insurance | you pay, ~$2,500 | you pay, ~$2,500 | included in quote |
| Quoted price you actually see | $20,000 | ~$20,400 equivalent | ~$22,900 equivalent |
| Australian customs clearance and broker | you pay, ~$300 | you pay, ~$300 | you pay, ~$300 |
| Duty (nil under ChAFTA) | $0 | $0 | $0 |
| GST (10% of value plus duty plus freight) | ~$2,290 | ~$2,290 | ~$2,290 |
| Port charges and delivery to site | you pay, ~$1,300 | you pay, ~$1,300 | you pay, ~$1,300 |
| Total landed | ~$26,790 | ~$26,790 | ~$26,790 |
The total landed cost is the same under all three, which is the whole point: the Incoterm does not change what the goods truly cost to get to your site, it only changes which slices the factory has bundled into its quote. What differs is transparency and control. Under FOB you see the freight as its own line and can shop it. Under CIF it is hidden inside the goods price and booked by the seller. Note that GST is charged on the value plus freight and insurance regardless of the term, so bundling freight into a CIF price does not avoid GST on it. For how that GST base is calculated, see our duty and GST guide, and for the freight leg itself our container shipping cost guide.
Common mistakes with Incoterms
Comparing an EXW quote against a CIF quote. They stop at completely different points. Always convert competing quotes to the same term, usually FOB, before you decide which factory is cheaper.
Reading CIF as door to door. CIF stops at the destination port. You still pay Australian clearance, duty, GST, port charges, and delivery. Builders who assume CIF means "delivered" under-budget the back half of the cost.
Relying on the seller's CIF insurance. It is minimum cover only. For glass, stone, and other fragile or high-value loads, arrange your own marine cargo insurance at a level you choose.
Reaching for DDP to keep it simple. Under DDP the seller is responsible for Australian import clearance, duty, and GST, which a Chinese factory is poorly placed to handle correctly. It often leads to wrong declarations, and a GST-registered builder normally wants to be the importer of record anyway so they can claim the import GST back. Keep control of the Australian side.
Not naming the port. FOB and CIF must name a port, for example FOB Shenzhen or CIF Melbourne. An unnamed term is ambiguous about exactly where costs and risk change hands.
Frequently asked questions
What is the difference between FOB and CIF when importing from China? Under FOB the factory delivers the goods loaded at a Chinese port and you arrange and pay for ocean freight, insurance, and the Australian side. Under CIF the factory also pays the ocean freight and minimum insurance to the destination port, but you still handle Australian clearance, duty, GST, and delivery. FOB gives you more control and clearer costs.
Which Incoterm is best for importing building materials to Australia? FOB is the usual default. It lets you compare factory quotes cleanly, control the freight and insurance, and see every cost, which suits consolidating building materials across suppliers into one container.
Does CIF include Australian customs duty and GST? No. CIF only covers costs to the destination port. Import clearance, duty, GST, port charges, and delivery to site are always yours. Confirm the rates with a customs broker.
Should I use DDP so the factory handles everything? Usually no. DDP puts Australian import clearance and taxes on the seller, who is rarely equipped to get them right, and a GST-registered builder normally wants to be the importer of record to claim the import GST back.
Threadline quotes on an FOB basis, arranges the freight and marine insurance, and works with a licensed broker so the Australian charges are transparent and the landed cost is one clear number. If you want a realistic landed estimate for your project, start a request. For the money side of an import, pair this with our guide to paying Chinese factories.
Ready to get a quote?
Submit your sourcing request and we'll come back with factory pricing, lead times, and a landed cost, usually within 48 hours.