How to Choose Trade Terms and Quote Price – Section 7

Master FOB, EXW, CIF, DDP and other shipping terms to save thousands on your China imports

Choosing the right Incoterm (International Commercial Term) can make or break your profit margins when importing from China. Understanding shipping terms like FOB, EXW shipping, CIF, and DDP incoterms is crucial for calculating accurate landed costs, negotiating better prices, and avoiding unexpected expenses.

In this comprehensive guide, BSA GROUP shares insider knowledge from over a decade of helping businesses navigate China import logistics. delivered duty paid incoterms,We’ll explain each Incoterm in plain English, show you which one saves you the most money, and reveal common pricing pitfalls that cost importers thousands of dollars.

Common examples of Incoterms

• EXW: Ex works (Air or Ocean)
  • Seller makes goods available at their facility
  • Buyer bears all costs & risks thereafter
• FCA  incoterms: Free Carrier (Air or Ocean)
  • Seller is responsible for getting goods loaded onto a truck for transport
  • Buyer bears all costs & risks thereafter
• FAS: Free Alongside Ship (Ocean)
  • Exporter is responsible for clearing goods at customs and delivering them to the vessel at point of origin.
  • NOTE: Not generally used for containerized goods.
• FOB: Free on Board (Ocean)
  • Seller is responsible for getting the goods to the port of export & loaded on the vessel
  • Buyer takes on all costs & risks thereafter
• CFR incoterms: Cost and Freight
  • Seller responsible for delivery of goods from their warehouse to the agreed destination port, including paying for transportation, delivery and clearing customs.
• CIF: Cost, Insurance & Freight
  • Seller has more responsibility and they will arrange transportation, freight duties and insurance.
  • RISKS: supplier chooses insurance (likely to choose cheapest, most basic insurance; CIF stops after goods arrive at port, if damage or storage occurs at port, that is importers responsibility)
• CPT: Carriage Paid To (Air or Ocean)
  • Relatively uncommon incoterm except for larger importer who have own port agents
  • While seller pays for transport of goods, buyer assumes risk (and insurance) once goods leave country or port of seller.
• CIP: Carriage and insurance Paid To (Air or Ocean)
  • Seller pays for, transportation, insurance and export clearance from point of origin to end destination.
• DAT: Delivery at Terminal (Air or Ocean)
  • Seller responsible for the goods up until the end destination. Buyer pays for customs clearance and taxes at destination.
• DAP shipping terms: Delivered at Place (Air or Ocean)
  • Seller is responsible for getting the goods to a named place agreed upon by the buyer
  • Buyer takes control of the goods after arrival at the named place; excluding Customs clearance
• DDP: Delivered Duty Paid (Air or Ocean)
  • Seller is responsible for delivering the goods to the buyer’s door; including Customs clearance

<a name=”why-incoterms-matter”></a>1. Why Incoterms Matter for China Imports

What Are Incoterms?

Incoterms (International Commercial Terms) are standardized trade terms published by the International Chamber of Commerce (ICC) that define:

• Who pays for what (shipping, insurance, customs duties)
• When risk transfers from seller to buyer
• Who handles documentation (export/import paperwork)
• Delivery responsibilities (where the seller’s obligation ends)

The cost and freight incoterm of Choosing Wrong

Real Example from BSA GROUP Client:

A small business owner importing yoga mats from China received these quotes from the same supplier:

The Mistake: She chose EXW thinking it was cheapest, but didn’t have a freight forwarder arranged. She ended up paying the supplier’s recommended logistics company, which charged premium rates. Her actual cost: $5.80/unit – more expensive than FOB and nearly as much as CIF!

The Lesson: The lowest quoted price doesn’t always mean the lowest total cost.

Why Most Guides Get It Wrong

Many online articles say “always use FOB for China imports.” This outdated advice doesn’t account for:

• Small order sizes (under 1 CBM) where courier shipping is more economical
• Multiple suppliers requiring consolidation
• First-time importers without freight forwarder relationships
• E-commerce sellers shipping directly to Amazon FBA
• Product complexity affecting domestic shipping costs in China

BSA GROUP’s Approach: We analyze your specific situation – order size, shipping destination, experience level, and logistics resources – to recommend the most cost-effective Incoterm for YOUR business.

The Three-Question Framework

Before requesting quotes, answer these questions:

1. Do you have a freight forwarder? (If no → consider CIF or DDP)
2. Are you buying from multiple suppliers? (If yes → FOB to same port)
3. Is your order small (<1 CBM)? (If yes → consider DDP door-to-door)

Let’s dive into each Incoterm in detail.

<a name=”fob-explained”></a>2. FOB (Free On Board) – The Most Popular Choice

What Does FOB Meaning,fob delivery meaning,fob meaning in shipping?

FOB (Free On Board) means the supplier is responsible for:

• Manufacturing the product
• Packing for export
• Domestic transportation to the port
• Export customs clearance
• Loading onto the vessel/aircraft

You (the buyer) are responsible for:

• International freight costs
• Marine/air insurance
• Import customs clearance
• Import duties and taxes
• Delivery from destination port to your warehouse

The Correct Way to Request FOB Pricing

❌ Wrong: “What’s your FOB price?”

✅ Correct: “What’s your FOB Ningbo price for 1,000 units?”

FOB MUST be followed by a specific port name:

• FOB Shanghai (largest port, most shipping options)
• FOB Ningbo (close to Yiwu and Hangzhou)
• FOB Shenzhen (for Guangdong suppliers)
• FOB Qingdao (for northern China suppliers)
• FOB Xiamen (for Fujian suppliers)

Choosing the Right Port

Strategy 1: Use Supplier’s Nearest Port

If buying from one supplier:

• Supplier in Hangzhou → Request FOB Ningbo
• Supplier in Guangzhou → Request FOB Shenzhen
• Supplier in Shanghai → Request FOB Shanghai

This minimizes supplier’s domestic shipping costs, which means better pricing for you.

Strategy 2: Consolidate Multiple Suppliers to Same Port

Real Scenario from BSA GROUP Client:

Importing from two suppliers:

• Supplier A (Hangzhou): 40 CBM of textiles
• Supplier B (Wuxi near Shanghai): 28 CBM of packaging

Wrong Approach (what most beginners do):

• Get FOB Ningbo from Supplier A: $10,000
• Get FOB Shanghai from Supplier B: $8,000
• Book two separate shipments
• Total cost: $18,000 + two container fees = $21,500

BSA GROUP Approach:

• Request both suppliers quote FOB Ningbo
• Consolidate into one 40’HQ container (68 CBM capacity)
• Supplier B’s cost increases $300 for extra domestic shipping
• Total cost: $18,300 + one container fee = $20,800
• Savings: $700 (3.3%)

Plus simplified customs clearance and tracking.

When FOB Makes the Most Sense

✅ Best for:

• Orders over 2 CBM (approximately 500-1,000 units)
• Sea freight shipments
• When you have established freight forwarder
• Multiple supplier consolidation
• Regular, repeat orders
• Business with import/export experience

❌ Not ideal for:

• First shipment under 1 CBM
• No freight forwarder relationship
• Urgent air shipments under 100kg
• Single sample orders
• Sellers using Amazon FBA who want door-to-door

FOB Cost Breakdown Example

Product: 2,000 ceramic mugs
Route: China to Los Angeles
Volume: 4 CBM

Pro Tip: When using FOB, always budget an extra 15-20% on top of the FOB price for all buyer-side costs.

<a name=”exw-explained”></a>3. Exw Incoterms – The Lowest Price Option

What Does EXW Meaning?

Delivery term exw  is the bare-bones price – just the product cost with no services included.

Supplier’s responsibility:

• Manufacture the product
• Pack it at their warehouse
• Have it ready for pickup

That’s it. Everything else is your responsibility.

You (the buyer) are responsible for:

• Pickup from supplier’s warehouse
• Domestic trucking in China
• Export customs clearance
• International freight
• Insurance
• Import clearance
• All delivery to your door

When to Use EXW

1. Price Comparison Between Suppliers

When evaluating multiple suppliers, exw shipping term gives you the purest product price without variables like location or shipping arrangements affecting the quote.

Example Comparison:

At first glance, Supplier B’s FOB price looks competitive. But look at their EXW price – they’re actually the cheapest manufacturer. Their domestic shipping to Shanghai port is adding $0.40/unit.

BSA Gexw priceROUP Strategy: If Supplier B is the best quality, we’d arrange pickup directly from their Hangzhou warehouse and ship from Ningbo port (30 minutes away) instead, saving that $0.40/unit.

2. You Have Strong China Logistics Network

If you have:

• Reliable freight forwarder with China warehouse
• Consolidation needs from multiple suppliers
• Your own Quality Control team inspecting at factories
• Regular, large volume shipments

Then incoterms exw ex work makes sense because your freight forwarder handles everything efficiently.

3. Small Quantity Orders

For small orders (under 500 units) where freight proportionally costs less, EXW can provide flexibility in choosing the most economical shipping method without committing to the supplier’s logistics arrangement.

The EXW Hidden Cost Trap

Warning: EXW often looks cheaper but ends up costing more!

Real BSA GROUP Client Story:

An Amazon seller ordered 800 phone cases:

• Supplier quote: $2.10/unit EXW Shenzhen
• Looked great! Competitor offered FOB Shenzhen at $2.45/unit

She hired a random freight forwarder from Alibaba:

• Pickup from factory: $80
• Warehouse handling: $60
• Export documentation: $150
• Trucking to port: $120
• Additional costs: $410 ÷ 800 units = $0.51/unit

Her actual EXW cost: $2.10 + $0.51 = $2.61/unit

She would have saved $0.16/unit ($128 total) by choosing FOB!

The Lesson: Unless you have reliable, cost-effective logistics arranged beforehand, EXW can backfire.

EXW Cost Breakdown Example

Product: 5,000 silicone phone cases
Supplier location: Shenzhen
Volume: 6 CBM

In this case, FOB shipping would have been $150 cheaper because the supplier has better domestic logistics rates than small freight forwarders.

BSA GROUP’s EXW Service

When clients want EXW pricing, we:

1. ✅ Verify it’s actually cheaper after all logistics added
2. ✅ Provide transparent breakdown of all pickup and handling costs
3. ✅ Use our established logistics network for best rates
4. ✅ Coordinate multiple EXW pickups for consolidation
5. ✅ Handle all export documentation and customs clearance

Result: Clients get true EXW savings without the headaches or hidden costs.

<a name=”cif-explained”></a>4. cif meaning (Cost, Insurance & Freight) – Door-to-Port Service

What Does cif incoterms Mean?

CIF (Cost, Insurance, and Freight) means the supplier handles everything until the products arrive at your destination port.

Supplier’s responsibility:

• Manufacturing
• Export packing
• Domestic transportation to China port
• Export customs clearance
• International freight to your country’s port
• Basic marine insurance (110% of invoice value)

You (the buyer) are responsible for:

• Import customs clearance
• Import duties and taxes
• Port fees and documentation
• Delivery from port to your warehouse

Understanding CIF Pricing Structure

Important: cif shipping only covers to the destination PORT, not your door.

CIF Cost Formula:

CIF Price = Product Cost + Domestic Shipping + Export Customs + 
            International Freight + Basic Insurance

The CIF Insurance Limitation

The insurance included in CIF covers total loss only – if the entire shipment is destroyed or lost at sea.

What CIF insurance DOES cover:

• ✅ Ship sinks
• ✅ Container falls overboard
• ✅ Total cargo destruction

What CIF insurance DOES NOT cover:

• ❌ Damaged products within intact container
• ❌ Partial damage to goods
• ❌ Quality issues
• ❌ Missing items from container

For comprehensive coverage, you need to purchase additional “All Risk” insurance (typically 0.3-0.5% of invoice value).

When CIF Makes Sense

✅ Best for:

• First-time importers without freight forwarder
• Irregular, one-off shipments
• When you want supplier to handle logistics
• Orders over 2 CBM going by sea freight
• Simplified budgeting (one price to port)
• When you have customs broker at destination

❌ Not ideal for:

• Small parcels under 1 CBM (courier is better)
• Multiple supplier consolidation
• When you need door-to-door delivery
• If you have better freight rates than supplier
• Regular, repeat shipments (fob shipping term becomes more cost-effective)

The CIF Pricing Reality Check

Critical Understanding: The shipping cost in CIF is just a fraction of your total logistics cost.

Real Example – 10 CBM from China to New York:

The Shock: Clients often see CIF $8,750 and budget $9,000 total. Then they get hit with $2,180 in additional costs (20% more) they didn’t expect!

BSA GROUP Tip: When you receive a CIF quote, add 20-30% for all post-port costs to get realistic total landed cost.

CIF vs FOB: Which Saves Money?

General Rule from BSA GROUP’s Experience:

For orders over 5 CBM:

• fob term with your own freight forwarder: Typically 10-15% cheaper
• CIF from supplier: More convenient but higher cost

Why?

• Suppliers mark up freight services 15-30%
• Your freight forwarder specializes in volume shipping
• Suppliers use one-size-fits-all logistics partnerships

For orders under 2 CBM:

• CIF pricing is often competitive
• Convenience worth the small premium
• Harder to find freight forwarders for small volumes

How to Request CIF Quotes Properly

❌ Wrong: “Give me your CIF price”

✅ Correct: “Please quote CIF New York (or Los Angeles, or Miami, etc.) for 1,000 units”

Specify:

• Exact destination port city
• Quantity
• Product specifications
• Any special handling requirements

Follow-up Questions to Ask:

1. “Is insurance included? What percentage of invoice value?”
2. “What’s the estimated transit time by sea?”
3. “Can you also provide FOB price for comparison?”
4. “Are there any peak season surcharges?”
5. “What happens if there’s damage – who files the insurance claim?”

CIF Hidden Costs Example

Product: 3,000 units water bottles
Volume: 8 CBM
Route: Ningbo to Los Angeles

Clients who budget only for the CIF price ($6,310 or $2.10/unit) face a nasty $2,076 surprise!

<a name=”ddp-explained”></a>5. ddp term (Delivered Duty Paid) – Complete Door-to-Door Service

What Does DDP Meaning?

ddp incoterms (Delivered Duty Paid) is the ultimate convenience option – the supplier handles absolutely everything and delivers to your door.

Supplier’s responsibility (ALL-INCLUSIVE):

• Manufacturing
• Export packing
• Domestic China transportation
• Export customs clearance
• International freight
• Insurance
• Import customs clearance in your country
• Import duties and taxes
• Delivery to your specified address

You (the buyer) are responsible for:

• Receiving the goods (that’s it!)
• Sometimes unloading (depending on agreement)

When DDP shipping Makes Perfect Sense

✅ Ideal for:

1. Complete Beginners

• First import ever
• No freight forwarder relationships
• Intimidated by customs procedures
• Want to test product before committing to larger infrastructure

2. Small E-commerce Sellers

• Amazon FBA sellers shipping directly to fulfillment centers
• Shopify stores with 3PL warehouses
• Orders under 1 CBM
• Need precise door-to-door pricing

3. Time-Sensitive Shipments

• Product launches with fixed dates
• Seasonal inventory needs
• Can’t afford customs delays
• Willing to pay premium for certainty

4. Research & Product Testing Phase

• Calculating true landed costs for viability
• Need accurate total cost before committing
• Comparing products from different suppliers
• Testing small batches

5. High-Value Small Items

• Electronics samples
• Jewelry or luxury goods
• Medical devices requiring special handling
• Items where door-to-door security matters

The DDP Cost Premium

Reality Check: incoterm ddp is the most expensive Incoterm, typically 15-40% more than FOB equivalent.

Why the Premium?

BSA GROUP Analysis:

• For orders under $2,000: Premium worth it
• For orders $2,000-$10,000: Depends on your experience
• For orders over $10,000: Usually not cost-effective

DDP vs DDU: Understanding the Difference

DDP (Delivered Duty Paid)

• Supplier pays import duties
• You receive goods with all costs settled
• True door-to-door

DDU (Delivered Duty Unpaid) – Term eliminated in Incoterms 2010 but still used

• Supplier handles everything EXCEPT duties
• You pay customs duty when goods arrive
• Now officially called DAP (Delivered at Place)

Why Suppliers Prefer DDU/DAP:

• Import duty varies by country/product
• Hard to predict exact amount
• Risk of under-quoting and losing money
• Some countries require importer to pay directly

How to Request ddp shipping terms Quotes

❌ Wrong: “What’s your DDP price?”

✅ Correct: “Please quote DDP to [exact address], including all duties and taxes for [quantity] units”

Include:

• Complete delivery address with postal code
• Delivery type (residential vs commercial address)
• Any access restrictions (lift gate needed, limited delivery hours)
• Expected duties (if known) or HS code

Critical Questions:

1. “Does the DDP price include import duty? What rate did you calculate?”
   • Some suppliers quote DDU but call it DDP
   • Verify duty percentage used (typically 0-25% depending on product)
2. “What’s the estimated delivery timeframe?”
   • Air DDP: 7-15 days
   • Sea DDP: 35-50 days
3. “Who handles customs if there’s an issue?”
   • Some suppliers hire local customs brokers
   • Others use their freight forwarder (slower resolution)
4. “Is residential delivery included or only commercial address?”
   • Residential delivery adds $75-150
   • Liftgate service (no loading dock): $50-100
5. “Can you provide both dap terms and FOB prices for comparison?”
   • See true convenience premium

DDP Cost Breakdown Example

Product: 500 units electronic gadgets
Volume: 1.2 CBM
Route: Shenzhen to Dallas, TX (residential address)

If you arranged FOB Shenzhen yourself:

• FOB price: $2,650
• Your direct freight & import: $1,450
• Total: $4,100
• DDP premium: $450 (11% more)

For a 500-unit first order, that $450 premium buys you tremendous peace of mind and saved time.

When DDP Doesn’t Make Sense

❌ Avoid DDP if:

1. Large Regular Orders

• Over 10 CBM or $15,000 per shipment
• Monthly/quarterly orders
• Premium adds up to thousands annually
• Better to establish your own logistics

2. Multiple Suppliers

• DDP works for single supplier
• Can’t consolidate shipments from different sources
• Each DDP shipment is separate
• Much more expensive than consolidated FOB

3. Complex Import Requirements

• Products requiring FDA, FCC, or other certifications
• Supplier may lack expertise in your country’s regulations
• Delays can be costly
• Better to use specialist customs broker

4. You Have Established Import Infrastructure

• Already have freight forwarder
• Understand customs procedures
• Have import/export license
• FOB saves significant money

The Amazon FBA DDP Advantage

For Amazon FBA sellers, DDP offers unique benefits:

Benefits:

• Direct delivery to Amazon fulfillment center
• No intermediate warehouse needed
• Exact delivery timing for inventory planning
• Amazon won’t accept FOB shipments with customs unpaid

Considerations:

• Amazon has strict delivery requirements (appointment needed)
• Supplier’s freight forwarder must be Amazon-certified
• Label requirements must be met
• Some suppliers can’t deliver to Amazon (use freight forwarder with “last mile” service)

BSA GROUP FBA Service: We specialize in DDP delivery to Amazon FBA centers, ensuring all Amazon requirements are met and appointments scheduled.

DDP Verification Checklist

Before accepting a DDP quote, verify:

• Import duty IS included (not DDU disguised as DDP)
• Duty percentage used matches your product’s HS code
• Delivery to your exact address (not just city)
• Residential vs commercial delivery clearly stated
• Any access restrictions addressed (liftgate, etc.)
• Insurance included
• Clear timeline provided
• Supplier has successfully delivered to your country before
• Payment terms acceptable (some require 100% upfront for DDP)

<a name=”dap-explained”></a>6. DAP (Delivered at Place) – The Flexible Alternative

What Does DAP Mean?

DAP (Delivered at Place) replaced the old DDU (Delivered Duty Unpaid) term in Incoterms 2010.

Supplier’s responsibility:

• Manufacturing
• Export packing
• Domestic China transportation
• Export customs clearance
• International freight
• Insurance
• Delivery to named place in your country

You (the buyer) are responsible for:

• Import customs clearance
• Import duties and taxes (key difference from DDP)
• Unloading goods

DAP vs DDP: The Critical Difference

Why Suppliers Prefer DAP Over DDP

1. Duty Uncertainty

• Import duties vary by country (0% to 35%+)
• Product classification disputes can change duty rates
• Hard to predict exact amount in advance
• Risk of under-quoting and losing money

2. Regulatory Complexity

• Each country has different customs procedures
• Some countries require registered importer to pay duties
• Certification requirements vary
• Suppliers lack expertise in foreign regulations

3. Payment Complications

• Some countries don’t allow foreign companies to pay duties
• Requires local customs bond
• Cash flow issues if duty is high

Real BSA GROUP Example:

A supplier quoted DDP USA for electronics:

• Expected duty: 3.5% (HS code 8517.62)
• Quoted DDP price based on 3.5%
• Actual assessed duty: 6.5% (customs reclassified product)
• Supplier lost $400 on $15,000 order

After this, they only offer DAP to US customers.

When DAP Makes Sense

✅ Best for:

1. Simplified Logistics, Flexible Duty Payment

• You’re comfortable handling customs clearance
• Import duties are variable or unclear
• Want door delivery without duty prepayment
• Supplier doesn’t offer true DDP

2. Countries with Import Restrictions

• Regulations require importer of record
• Need local company to clear customs
• Supplier cannot legally pay duties
• Examples: Brazil, Indonesia, India (in some cases)

3. High-Value Products

• Duty could be $5,000+
• Want to verify product before paying duty
• Prefer to pay duty directly to customs
• Better cash flow management

4. Tax Optimization

• Your company has special duty rates
• Trade agreements provide duty reductions
• You can claim duty drawbacks
• Want control over customs declarations

DAP Cost Structure

Product: 2,000 units home décor
Volume: 5 CBM
Route: Yiwu to Chicago

The Variable: That $400-600 spread in final cost due to duty and clearance fees.

How to Handle DAP Shipments

Option 1: Use Customs Broker

• Hire professional broker ($150-300)
• They handle all paperwork
• Pay duty on your behalf
• You reimburse them
• Best for: Regular importers

Option 2: Self-Clear (Advanced)

• Handle customs paperwork yourself
• Save broker fees
• Requires import/export knowledge
• Time-consuming
• Best for: Experienced importers with time

Option 3: BSA GROUP Customs Support

• We coordinate with local customs broker
• Transparent fee structure
• Handle any issues that arise
• You just pay the duty directly
• Best for: Clients wanting support without full DDP

DAP Delivery Considerations

Named Place Options:

1. Port/Airport (Similar to CIF but includes insurance longer)

• “DAP Los Angeles Port”
• You handle pickup from port
• Lower cost than door delivery

2. Your Warehouse/Address

• “DAP [Your address]”
• Full door-to-door delivery
• You just clear customs and pay duty
• Most common usage

3. Freight Forwarder’s Warehouse

• “DAP [Forwarder’s facility]”
• Good for LCL consolidation
• Allows inspection before duty payment
• Flexibility for redistribution

DAP vs CIF: Key Differences

Many people confuse DAP and CIF. Here’s the clarity:

DAP Success Tips from BSA GROUP

1. Always Specify Exact Location

• “DAP Chicago” is too vague
• “DAP 123 Main St, Chicago, IL 60601” is correct
• Include delivery instructions

2. Clarify Duty Responsibility in Writing

• State in contract: “DAP – import duty paid by buyer”
• Avoid confusion about who pays what
• Get estimated duty range from supplier

3. Arrange Customs Broker Before Shipment Arrives

• Don’t wait until goods arrive
• Set up account with broker
• Provide product information in advance
• Avoid demurrage/storage fees

4. Verify Delivery Type

• Commercial address vs residential
• Loading dock available?
• Delivery appointment needed?
• Special equipment required?

<a name=”choosing-incoterms”></a>7. Which Incoterm Should You Choose?

The BSA GROUP Decision Matrix

Use this flowchart to choose the right Incoterm for your situation:

START: Do you have a freight forwarder?
├─ NO → Is order under 2 CBM?
│  ├─ YES → Use DDP (door-to-door convenience)
│  └─ NO → Use CIF (port delivery, then hire customs broker)
│
└─ YES → Are you buying from multiple suppliers?
   ├─ YES → Use FOB to same port (consolidation)
   └─ NO → Is it your first order with this supplier?
      ├─ YES → Use FOB (establish relationship, verify costs)
      └─ NO → Use EXW (maximum cost control)

Incoterm Comparison Table

Incoterm Selection by Business Type

Amazon FBA Seller (Small to Medium Volume)

• First choice: DDP to Amazon fulfillment center
• Second choice: FOB + freight forwarder with Amazon delivery experience
• Why: Direct FBA delivery, no intermediate storage needed

E-commerce Store Owner (Shopify, WooCommerce)

• First choice: DDP to 3PL warehouse or your location
• Second choice: CIF + customs broker + last mile delivery
• Why: Simplified process, predictable costs

Wholesale/Distribution Business (Large Volume)

• First choice: FOB to nearest port
• Second choice: EXW with consolidation
• Why: Maximum cost control, volume justifies logistics infrastructure

Retail Store Owner (Brick and Mortar)

• First choice: DDP to store or warehouse
• Second choice: CIF + local delivery
• Why: Focus on retail, not logistics

First-Time Importer (Testing Product)

• First choice: DDP (learn with least risk)
• Second choice: CIF (slightly cheaper, manageable complexity)
• Why: Minimize learning curve and risk

Experienced Importer (Established Business)

• First choice: FOB (standard for regular shipments)
• Second choice: EXW (when optimizing costs)
• Why: Infrastructure in place, maximize efficiency

Order Size Impact on Incoterm Choice

Micro Orders (<0.5 CBM or <$1,000)

• ✅ DDP courier service (DHL, FedEx, UPS)
• ✅ Air freight DDP
• ❌ FOB (doesn’t make economic sense)
• ❌ Sea freight (minimum costs too high)

Small Orders (0.5-2 CBM or $1,000-$5,000)

• ✅ DDP (convenience worth premium)
• ✅ CIF + customs broker
• ⚠️ FOB (only if experienced)
• ❌ EXW (too complex for size)

Medium Orders (2-10 CBM or $5,000-$20,000)

• ✅ FOB (sweet spot for cost control)
• ✅ CIF (if lacking freight forwarder)
• ⚠️ DDP (premium may be worth it for convenience)
• ⚠️ EXW (if you have good logistics)

Large Orders (10+ CBM or $20,000+)

• ✅✅ FOB (standard choice)
• ✅ EXW (for maximum control)
• ❌ CIF (unnecessary markup)
• ❌ DDP (too expensive)

Full Container Load (20ft/40ft)

• ✅✅ FOB (only logical choice)
• ✅ EXW (when buying from multiple suppliers to consolidate)
• ❌ CIF/DDP (don’t make sense for FCL)

Shipping Method Impact

Air Freight

• Small shipments (<100kg): DDP courier
• Medium (100-500kg): DDP or CIF
• Large (500kg+): FOB or CIF

Sea Freight LCL (Less than Container Load)

• Usually: FOB or CIF
• Rarely: DDP (expensive for LCL)

Sea Freight FCL (Full Container Load)

• Always: FOB
• Sometimes: EXW (for consolidation)

<a name=”negotiation-strategies”></a>8. Price Negotiation Strategies Beyond Incoterms

Strategy 1: Request Quantity Breakdowns

Most suppliers offer tiered pricing based on volume but won’t volunteer this information.

How to Ask:

“Please provide a price list showing costs at different quantities:

• 500 units
• 1,000 units
• 3,000 units
• 5,000 units
• 10,000 units”

Real BSA GROUP Client Example:

Backpack supplier pricing:

Key Insight: The big drop happens at 1,000 units (8.2% savings). After 5,000 units, additional savings are minimal (only 0.6% more at 10,000).

Negotiation Leverage: “I can commit to 3,000 units if you can offer the 5,000-unit price of $6.90.”

Strategy 2: Understand MOQ Flexibility

Minimum Order Quantity (MOQ) is almost always negotiable, especially for:

• First-time buyers
• Long-term potential customers
• Slow seasons
• Multiple product orders

The Wrong Approach: “Your MOQ is 1,000 but I only need 300. Can you do it?” (This signals you’re a small player)

The BSA GROUP Approach: “For my initial test order, I need 300 units. Based on market response, I anticipate monthly orders of 1,000-2,000 units. Can you accommodate a smaller first order at a slightly higher price, with regular larger orders to follow?”

What Happens:

• Shows serious, long-term commitment
• Gives supplier confidence
• Often results in: “I can do 300 units at $9.20 (vs $8.50 for MOQ). When you order 1,000+, price drops to $8.00”

Strategy 3: The Multi-Product Leverage

When ordering multiple products from the same supplier:

Individual Product MOQs:

• Product A: 1,000 units @ $5.00 = $5,000
• Product B: 1,500 units @ $8.00 = $12,000
• Product C: 2,000 units @ $3.50 = $7,000
• Total: $24,000

Negotiation Strategy: “I’m ordering three products for a total of $24,000. Can you lower the individual MOQs since my total order value is substantial?”

Typical Result:

• Product A: 600 units (40% MOQ reduction)
• Product B: 1,000 units (33% MOQ reduction)
• Product C: 1,500 units (25% MOQ reduction)
• Same total value, better product mix for your market test

Strategy 4: Timing Your Order

Slow Seasons for Chinese Manufacturing:

• Post-Chinese New Year (March-April)
• Summer months (July-August)
• Late November-December

Peak Seasons (Higher Prices, Longer Lead Times):

• Pre-Chinese New Year (November-January)
• Back-to-school season (June-July)
• Pre-Christmas (September-October)

BSA GROUP Strategy:

• Order during slow seasons for 10-15% better pricing
• Negotiate harder when factories need orders
• Lock in annual pricing contracts during slow periods

Strategy 5: Payment Terms Negotiation

Standard payment terms for new buyers:

• 30% deposit
• 70% before shipment

Better Terms You Can Negotiate:

For Orders $5,000-$10,000:

• 30% deposit
• 40% at production midpoint
• 30% before shipment (Spreads cash flow, adds inspection point)

For Regular Customers (3+ orders):

• 30% deposit
• 70% within 15-30 days of arrival (Net terms = huge cash flow advantage)

For Large Orders ($50,000+):

• Letter of Credit (protects both parties)
• 20% deposit
• 80% on L/C terms

How to Negotiate: “I understand 30/70 is standard for new customers. After successful completion of this first order, can we discuss net-30 terms for future orders? This would allow me to order more frequently.”

Strategy 6: The Comparison Quote Technique

When evaluating multiple suppliers:

Step 1: Get detailed quotes from 3-5 suppliers Step 2: Identify the best aspects of each quote Step 3: Use competition to negotiate

Script: “I’ve received quotes from several suppliers. Your quality appears excellent, but Supplier B is offering $7.50 vs your $8.20. Your lead time of 25 days is better than Supplier C’s 35 days, which I value. If you can match the $7.50 price point, I’ll place my order with you immediately.”

BSA GROUP Tip: Never fabricate lower prices – use real competitive quotes. Suppliers can sense dishonesty and it damages relationships.

Strategy 7: Simplify to Reduce Cost

Often, products have unnecessary features that increase cost:

Example – Custom Packaging:

• Custom printed box: $0.40/unit
• Poly bag + simple box: $0.08/unit
• Savings: $0.32/unit (38% reduction on packaging)

Questions to Ask:

1. “What’s the price difference between custom logo and no logo?”
2. “Can we use standard packaging for the first order?”
3. “What if we eliminate the insert card?”
4. “Does the product need foam padding or will bubble wrap work?”

Real Result: Client saved $2,100 on 5,000-unit order by using simpler packaging for initial market test.

Strategy 8: Long-Term Commitment Pricing

The Offer: “I’m planning to order quarterly throughout the year. If I commit to four orders totaling $40,000 annually, what pricing can you offer?”

Why It Works:

• Suppliers prefer reliable customers
• Guaranteed business = lower margins acceptable
• Reduces their sales/marketing costs
• Easier production planning

Typical Savings: 8-12% below one-time order pricing

<a name=”hidden-costs”></a>9. Hidden Costs to Watch For

Hidden Cost #1: Packaging Not Included

The Trap:

Supplier quotes: “$2.00 per unit FOB Ningbo”

You ask: “Does this include packaging?”

Supplier: “Yes, standard packaging included.”

What you receive: Products packed loosely in bulk cartons with no individual packaging.

What you expected: Each unit in retail-ready packaging.

The Cost: Individual retail boxes add $0.15-$0.50 per unit (7.5-25% price increase!)

How to Avoid:

✅ Specific Questions to Ask:

1. “Please describe exactly what packaging is included in your quote”
2. “Is each unit individually packaged or bulk packed?”
3. “Can you send photos of standard packaging?”
4. “What’s the cost difference for individual retail boxes?”
5. “Is protective packaging (foam, bubble wrap) included?”

✅ Request Packaging Samples: Before production, approve actual packaging to avoid surprises.

Real BSA GROUP Client Story:

Ceramic mug order:

• Quoted price: $2.10/unit “with packaging”
• Expected: Individual gift boxes
• Received: 12 mugs per master carton, no individual boxes
• Actual individual box cost: $0.25/unit
• True cost: $2.35/unit (12% higher!)

Resolution: Client had to scramble for local packaging, costing even more. Should have clarified before ordering.

Hidden Cost #2: Customization Fees

The Trap:

You order products and mention wanting your logo printed.

Supplier: “No problem!”

(No mention of additional cost)

After you pay 30% deposit, supplier sends invoice for:

• Logo setup fee: $150
• Printing cost: $0.30/unit
• Minimum quantity increase: 500 → 1,000 units

Surprise costs: $450+ not in original quote

How to Avoid:

✅ Clarify ALL Customization Costs Upfront:

• Logo printing/engraving costs
• Setup/plate/mold fees
• Color matching fees
• Minimum quantity changes
• Lead time impacts

✅ Get Itemized Quote:

Base product: $2.00/unit
Logo printing (1 color, 1 location): $0.20/unit
Setup fee (one-time): $100
Total for 1,000 units: $2,100 + $100 = $2,200

BSA GROUP Practice: We require suppliers to provide full breakdown before client commits.

Hidden Cost #3: Inventory vs. New Production

The Trap:

Supplier quotes amazing price: $3.50/unit (Competitor quoted $4.20)

You order 1,000 units at $3,500.

Three months later, you reorder.

New quote: $4.50/unit (28% increase!)

What happened: First order was inventory/stock they needed to clear. New production costs more.

How to Avoid:

✅ Critical Question: “Is this price for current inventory stock or new production?”

✅ Follow-up: “If this is stock, what’s the price for new production for future orders?”

✅ Stock Warning Signs:

• Unusually low price vs competitors
• Limited quantity available
• Fast delivery (under 1 week)
• Pressure to order quickly
• Supplier mentions “special price”

✅ Stock Risks:

• May be older inventory (dust, rust, degradation)
• Could be overstock from canceled orders
• Might have minor defects
• Unsustainable pricing for reorders

BSA GROUP Inspection: When we suspect stock inventory, we conduct extra thorough inspections for age-related issues.

Hidden Cost #4: Quality Level Not Specified

The Trap:

You order 2,000 units at $5.00/unit based on a nice sample.

Products arrive. Quality is noticeably lower than sample.

You complain. Supplier says: “You ordered standard quality. Sample was premium quality. For premium, price is $6.50/unit.”

The Cost: You’re stuck with inferior products or need to pay 30% more for what you expected.

How to Avoid:

✅ Sample Approval Process:

1. Request sample and note the quality level
2. In your Purchase Order, reference: “Production quality to match approved sample #XYZ dated [date]”
3. Include photos of approved sample
4. State: “Any deviation from approved sample requires pre-approval”

✅ Quality Specifications: For products with grades, specify:

• “Grade A quality”
• “Export quality”
• “Premium quality”
• “First-grade materials”

✅ Pre-Production Sample: Request supplier make a pre-production sample from actual production materials before mass production begins.

Hidden Cost #5: Domestic Shipping Increases

The Trap:

Initial FOB quote includes domestic shipping from factory to port.

You reorder six months later. Same FOB price quoted.

At payment time, supplier adds: “Domestic shipping cost increased $200 since last order. Please pay additional.”

How to Avoid:

✅ Lock in Pricing: “For this FOB quote, is domestic shipping included at this price for future orders?”

✅ Volume Commitment: “I plan to order quarterly. Can we lock in pricing including domestic shipping for one year?”

✅ Alternative: Switch to EXW pricing + your own logistics for price stability

Hidden Cost #6: Currency Fluctuation

The Trap:

Supplier quotes in USD: $10,000

You agree. Then supplier says: “Please pay RMB equivalent at time of payment.”

USD/RMB rate changes 5% before you pay.

Your $10,000 now requires $10,500.

How to Avoid:

✅ Specify: “Price is $10,000 USD firm, regardless of currency fluctuation”

✅ Or: “Price is ¥70,000 RMB firm” (locks in RMB amount)

✅ BSA GROUP Practice: We use USD pricing with major suppliers who accept exchange rate risk. For smaller suppliers, we pay quickly to minimize exposure.

Hidden Cost #7: Inspection Failures

The Trap:

Products fail pre-shipment inspection.

Supplier must rework or remake products.

Lead time extends 3 weeks.

You have:

• Lost sales (inventory delay)
• Rush air freight costs to meet deadlines
• Customer deposits to refund

Cost: $2,000+ in losses for a $5,000 order

How to Avoid:

✅ Multiple Inspection Points:

• Pre-production (verify materials)
• During production at 50% (catch issues early)
• Pre-shipment (final verification)

✅ Clear Quality Standards: Define acceptable defect rates (AQL levels)

✅ BSA GROUP Service: We conduct inspections and require corrections before final payment, preventing costly surprises.

Hidden Cost #8: Port Congestion & Delays

The Trap:

CIF quote includes sea freight: “$400 per CBM”

Port congestion hits. Shipping lines add:

• Peak season surcharge: +$100/CBM
• Port congestion fee: +$150/CBM
• Fuel surcharge: +$50/CBM

Your $400/CBM becomes $700/CBM (75% increase!)

How to Avoid:

✅ Ask for All-In Quote: “Please include ALL surcharges, fees, and peak season charges in CIF price”

✅ Timing: Avoid peak seasons if possible:

• Pre-Chinese New Year (Dec-Feb)
• Back-to-school (July-August)
• Pre-Christmas (Sept-Oct)

✅ FOB Advantage: With your own freight forwarder, you get advance warning of surcharges and can shop rates.

<a name=”bsa-group-services”></a>10. How BSA GROUP Saves You Money on Incoterms

Our Incoterm Optimization Service

BSA GROUP doesn’t just find suppliers – we optimize your entire cost structure by selecting the ideal Incoterm for your specific situation.

Service 1: True Cost Analysis

What We Do:

For any product you’re considering, we provide complete cost breakdown across all Incoterms:

Example Report for Client (Yoga Mats):

COST COMPARISON: 2,000 Yoga Mats (6 CBM) - China to Los Angeles

EXW Hangzhou:
- Product cost: $6,000
- BSA pickup service: $120
- Export customs: $180
- Trucking to Ningbo: $150
- Sea freight: $480
- US customs: $200
- Import duty (10%): $600
- LA delivery: $400
TOTAL: $8,130 ($4.07/unit)

FOB Ningbo:
- FOB price: $6,500
- Sea freight: $480
- US customs: $200
- Import duty: $650
- LA delivery: $400
TOTAL: $8,230 ($4.12/unit)

CIF Los Angeles:
- CIF price: $7,800
- US customs: $200
- Import duty: $780
- Port to warehouse: $350
TOTAL: $9,130 ($4.57/unit)

DDP Door:
- DDP price: $9,500
TOTAL: $9,500 ($4.75/unit)

BSA RECOMMENDATION: EXW + our logistics
SAVINGS: $1,370 (14.4% less than DDP)

Value: Clients make informed decisions, not guesses.

Service 2: Multi-Supplier Consolidation

The Problem:

Client wants to order from 3 different suppliers:

• Supplier A (Shanghai): Gaming accessories
• Supplier B (Guangzhou): Electronics
• Supplier C (Yiwu): Packaging materials

DIY Approach:

• Order DDP from each supplier
• Three separate shipments
• Total cost: $15,800

BSA GROUP Approach:

• Quote EXW from all three
• Consolidate at Ningbo warehouse
• Single FOB Ningbo shipment
• Total cost: $12,400
• Savings: $3,400 (21.5%)

Service 3: Incoterm Negotiation

Scenario:

Client received quotes:

• FOB Shanghai: $8.20/unit
• DDP: $11.50/unit (40% premium!)

BSA GROUP Intervention:

1. ✅ Requested itemized breakdown of DDP costs
2. ✅ Identified excessive logistics markup (35%)
3. ✅ Negotiated FOB to $7.90/unit
4. ✅ Arranged our logistics: $2.10/unit
5. ✅ Final cost: $10.00/unit
6. ✅ Client savings: $1.50/unit ($3,000 on 2,000 units)

Service 4: Hidden Cost Protection

BSA GROUP Contract Clauses:

Our Purchase Orders include:

✅ Packaging Specification “Price includes individual retail packaging as per approved sample #45 dated May 15, 2025”

✅ Quality Lock “Production quality to exactly match approved sample. Any deviation voids agreement”

✅ Price Lock “FOB Ningbo price of $X.XX includes all domestic costs for 12 months or 4 orders, whichever comes first”

✅ No Hidden Fees “Quoted price is final. No additional fees for customization, packaging, or domestic shipping permitted”

Result: Clients never face surprise costs.

Service 5: Logistics Network Access

BSA GROUP Shipping Rates (Negotiated Volume Discounts):

Annual Savings for Typical Client: $4,000-$8,000

Service 6: Customs Clearance Support

Standard Customs Broker Fees:

• Document review: $75
• Customs clearance: $150
• ISF filing: $75
• Examination (if occurs): $300 Total: $600 per shipment

BSA GROUP Customs Service:

• Document review: Included
• Customs clearance: $95
• ISF filing: Included
• Examination support: $150 Total: $95-245 per shipment

Plus:

• Faster processing (existing relationships)
• Duty classification expertise (avoid overpayment)
• Problem resolution (we advocate for you)

Real Client Success Stories

Case Study 1: Amazon FBA Seller – Electronics

Challenge:

• 800 units Bluetooth speakers
• First import ever
• Needed delivery to Amazon FBA warehouse
• Budget: $12,000 total

Supplier Quotes:

• DDP Amazon FBA: $14,500 (over budget)
• FOB Shenzhen: $8,200 (didn’t know how to handle logistics)

BSA GROUP Solution:

• Negotiated FOB to $7,850
• Arranged our DDP service to Amazon: $2,680
• Ensured Amazon labeling requirements met
• Total cost: $10,530
• Savings: $3,970 (27% under DDP quote)
• Result: Client launched successfully, now orders monthly

Case Study 2: Wholesale Distributor – Home Goods

Challenge:

• 3 suppliers, 8 CBM total
• All quoted CIF separately
• Combined cost: $18,900

BSA GROUP Solution:

• Switched to FOB from all suppliers to Ningbo
• Consolidated in our warehouse
• Single FOB shipment
• Client’s freight forwarder handled US side
• Total cost: $14,200
• Savings: $4,700 (25%)
• Bonus: Simplified customs (one entry vs three)

Case Study 3: Retail Store Owner – First Import

Challenge:

• 500 decorative items
• Zero import experience
• Worried about complexity
• Supplier quoted DDP: $6,800

BSA GROUP Solution:

• Educated client on process
• Recommended CIF for first order: $5,100
• Arranged customs broker introduction: $185
• Coordinated delivery: $280
• Total cost: $5,565
• Savings: $1,235 (18%)
• Result: Client gained confidence, switched to FOB for second order (saved even more)

BSA GROUP Pricing Models

Option 1: Full-Service Sourcing Package

• Includes Incoterm optimization
• All logistics coordination
• Quality control
• Customs support
• Service fee: 8-12% of order value

Option 2: Logistics Only Service

• You’ve found supplier
• We handle logistics optimization
• Choose best Incoterm and execute
• Service fee: 5-8% of order value

Option 3: Consultation Only

• Review your quotes
• Recommend optimal Incoterm
• Provide cost breakdown
• One-time fee: $200-500

ROI: Most clients save 2-5X our service fees.

Conclusion: Master Incoterms, Maximize Profits

Key Takeaways

1. No “One Size Fits All” Incoterm

• FOB is popular, not always cheapest
• Match Incoterm to your situation
• Consider order size, experience, and resources

2. Hidden Costs Are the Real Profit Killers

• Always get itemized quotes
• Specify packaging exactly
• Verify quality levels match samples
• Lock in pricing with long-term commitments

3. The Lowest Quote Isn’t Always the Lowest Cost

• EXW requires logistics expertise
• DDP offers convenience at premium
• Calculate true landed cost across all options

4. Consolidation Saves Money

• Multi-supplier orders to same port
• Combine small orders into larger shipments
• Use freight forwarder’s consolidation services

5. Experience Reduces Costs Over Time

• Start with DDP/CIF for learning
• Move to FOB as you gain experience
• Eventually use EXW for maximum control

Your Action Plan

For Your Next Import:

Step 1: Define Your Situation

• Order size (CBM and value)
• Number of suppliers
• Shipping destination
• Timeline urgency
• Your experience level
• Available logistics resources

Step 2: Request Comprehensive Quotes

• Ask for at least 2 Incoterm options (e.g., FOB and DDP)
• Request itemized cost breakdowns
• Clarify packaging included
• Verify quality level matches sample
• Get quantity-based pricing tiers

Step 3: Calculate True Landed Cost

• Add ALL post-Incoterm costs
• Include import duties (check HS code)
• Factor in currency fluctuation risk
• Budget 10% buffer for surprises

Step 4: Optimize (This is Where BSA GROUP Helps)

• Compare total costs across Incoterms
• Identify potential consolidation opportunities
• Negotiate based on volume/commitment
• Lock in pricing for future orders

Step 5: Protect Yourself

• Get everything in writing
• Use clear Purchase Order with specifications
• Include penalty clauses for non-compliance
• Arrange inspections before final payment

Partner with BSA GROUP

Why struggle with Incoterm complexity when you can leverage our decade of experience?

What We Offer:

✅ Free initial Incoterm analysis

✅ True cost comparison across all options

✅ Negotiated logistics rates (20-30% below market)

✅ Multi-supplier consolidation

✅ Quality control at every stage

✅ Customs clearance support

✅ Problem resolution guarantee

Our Promise: We save you more than our fees cost, or we refund the difference.

Get Started Today

Free Incoterm Consultation

Send us your supplier quotes and we’ll provide:

• Cost comparison across all Incoterms
• Hidden cost identification
• Optimization recommendations
• Estimated savings with BSA GROUP service

No obligation, just valuable insights to help you make the right decision.