Hey there! I’m Gary, a sourcing agent based in Guangzhou, China, with over ten years of helping folks buy from factories. Early on, I got tangled in shipping terms (Incoterms) like EXW, FOB, and CIF. They sounded like code, and I messed up plenty. But now? I’ve cracked them, and they’ve saved me and my clients headaches and cash. Today, I’ll share my story, explain Incoterms 2020 in plain words, and show you how to pick the right one. Let’s make international trade less scary!
My Incoterms Wake-Up Call
My first big order was a disaster. A client from Canada wanted 500 gadgets -$10,000 worth. The supplier quoted EXW, and I nodded, thinking, “Cheap price, great!” Then the shipping bill hit $2,000 extra, because EXW meant I handled everything: export papers, trucking, customs. I didn’t know who paid what or who did what. The client was furious, and I ate the cost. That’s when I learned: Incoterms aren’t just terms, they’re rules that split duties, costs, and risks. Now, I live by them.
What Are Incoterms and Why Care?
Incoterms come from the International Chamber of Commerce (ICC). They’re like a trade playbook-11 terms in 2020, telling buyers and sellers who does what: who pays shipping, who handles insurance, who takes the risk if goods get lost. They cut confusion in deals and settle fights fast. I’ve used them to save time negotiating with factories and to keep my Muslim clients clear on who’s responsible when sourcing from China.
The 11 Incoterms 2020: My Quick Take
Here’s how I break them down -two groups, simple and real:
Sea and River Terms: For ships only.
FOB (Free on Board): Seller loads goods on the ship; I take over from there-shipping, insurance, all mine.
FAS (Free Alongside Ship): Seller drops goods near the ship; I handle the rest.
CFR (Cost and Freight): Seller pays shipping to my port; I cover insurance and unloading.
CIF (Cost, Insurance, Freight): Seller pays shipping and insurance to my port-I just unload.
Any Transport Terms: Works for air, truck, anything.
EXW (Ex Works): Seller hands me goods at their door; I do everything else-export, shipping, all of it.
FCA (Free Carrier): Seller gives goods to my shipper in China; I pay from there.
CPT (Carriage Paid To): Seller pays shipping to my spot; I handle insurance and pickup.
CIP (Carriage and Insurance Paid To): Seller covers shipping and insurance to my spot-I pick up.
DAP (Delivered at Place): Seller delivers to my spot; I unload and handle clearing customs and duties.
DDU (Delivered Duty Unpaid): Seller delivers to my spot, and buyer clears customs and covers duties.
DDP (Delivered Duty Paid): Seller does it all-shipping, customs, taxes-to my door.
Which Incoterms Fit When?
I’ve learned each term fits different buyers -here’s my go-to guide:
EXW: Great if you know China’s export game. I used it once for a pro importer, saved $500, but it’s tough for newbies.
FOB: Perfect if you’ve got a freight forwarder. I’ve shipped textiles FOB for a Muslim client -smooth, once I booked the ship.
CIF: Newbies love it -seller handles shipping and insurance. I used CIF for a first-timer; he just waited at the port.
DDP: E-commerce stars -like Amazon FBA sellers-pick this. I sourced 300 prayer mats DDP, straight to the warehouse, no fuss.
Who Pays Shipping?
Here’s the split I’ve memorized:
Freight Collect (I Pay): EXW, FCA, FOB, FAS, I cover shipping from China.
Freight Prepaid (They Pay): CFR, CIF, CPT, CIP, DAP, DPU, DDP, seller pays to my side.
I double check this with factories, saved a client $1,000 once when a supplier tried flipping FOB to EXW mid-deal.
Incoterms on Alibaba: My Experience
Alibaba quotes usually start with EXW or FOB -cheap but tricky. I’ve negotiated CIF or DAP with sellers there. Once, a “FOB” supplier pushed EXW, I asked, “Can you ship CIP?” They said yes, and I got insurance covered. Always chat, don’t take their first term as final.
Flexibility: Bend the Rules
Incoterms aren’t stone. I’ve tweaked them in contracts. For an FOB deal, I asked the seller to book shipping, paid extra, but it saved me time. Another time, a Muslim client wanted DDU but no customs, he handled taxes, seller did the rest. Write it down, agree, and it works.
My Real Wins (and Flops)
Incoterms have been my shield. For a UK client, I used CIF, seller shipped 200 lamps to London, insurance included. Storm hit, goods survived, seller’s risk, not ours. But I’ve flopped too. Early on, I picked EXW without a forwarder -spent days on export papers, lost $300 in fees. Now, I match the term to the buyer’s know-how.
For Muslim clients, it’s personal. I’ve sourced halal goods DAP -factory to door, no stress. One thanked me for explaining FOB-he saved $800 by skipping a trader. Clarity wins.
How to Pick Your Incoterm
Here’s my advice-stuff I’ve lived:
Know Your Skills: New? Go CIF or DDP -less work. Pro? Try FOB or FCA -more control.
Check Costs: EXW looks cheap, but shipping adds up. I compare total costs -product, freight, taxes.
Ask the Seller: “What terms do you offer?” I’ve turned EXW into CIP with one call.
Write It Clear: Put the Incoterm in your contract -city, port, all details. No guesswork.
My Takeaway
Incoterms aren’t just rules, they’re tools. I’ve haggled in factory offices, tracked ships at midnight, and learned who pays what the hard way. They’ve saved me from late shipments, lost goods, and angry clients. For small buyers or Muslim traders, they’re a map, pick the right one, and China’s yours. Start easy, try FOB with a forwarder. Need help? I’m here.
About Gary Sourcing
Need a hand with China sourcing? Gary Sourcing is your partner! I’m Gary, a Guangzhou-based expert offering factory audits, shipping help, and Muslim-friendly trade solutions. From Incoterms to quality checks, we’ve got you. Contact us at info@garysourcing.com or visit our site for more trade tips!