An Incoterm is a three-letter trade term that says who arranges and pays for each part of a shipment, and the point at which the risk of loss passes from seller to buyer. For most Bangladesh importers buying from China by sea, the three terms that come up most often in quotations are EXW, FOB and CIF. FOB is usually the easiest to compare and control; EXW gives you the most work and risk; CIF looks simple but hides some limits.
This guide explains what each term means under Incoterms 2020, how they differ in practice, and how to choose. It is general education, not legal or customs advice. Always confirm the exact term, the named place and the edition (for example “FOB Ningbo, Incoterms 2020”) in your contract.
Quick answer
- EXW (Ex Works): the seller makes the goods available at its own premises. You arrange and pay for almost everything after that.
- FOB (Free On Board): the seller delivers the goods on board the vessel you nominate at the named Chinese port. Risk passes once they are on board.
- CIF (Cost, Insurance and Freight): the seller pays freight and minimum insurance to the named port of destination, but risk still passes at loading in China.
What does an Incoterm actually decide?
An Incoterm answers four practical questions: who books and pays for transport, who arranges export clearance, who insures the goods, and where responsibility for damage or loss moves from seller to buyer. It does not decide when you pay, who owns the goods, or what happens if the product is defective. Those belong in your purchase contract.
The same factory can quote very different prices under different terms, so a price is only meaningful alongside its Incoterm. This is why our quotation comparison method puts the Incoterm next to the price before anything else is compared.
EXW, FOB and CIF compared
| Question | EXW | FOB | CIF |
|---|---|---|---|
| Where does the seller’s job end? | At the seller’s premises, goods made available | Goods on board the vessel at the Chinese port | Goods on board, with freight paid to the destination port |
| Who arranges China inland transport? | Buyer | Seller | Seller |
| Who clears export in China? | Buyer (under Incoterms 2020 EXW) | Seller | Seller |
| Who books the main sea freight? | Buyer | Buyer | Seller |
| Who insures the cargo? | Buyer, if they choose to | Buyer, if they choose to | Seller must provide minimum cover for the buyer |
| Where does risk pass to the buyer? | At the seller’s premises | When goods are on board | When goods are on board (not at destination) |
| Who clears import in Bangladesh? | Buyer | Buyer | Buyer |
EXW: Ex Works
Under EXW the supplier only has to make the goods available at its factory or warehouse. You collect them, clear them for export from China and carry the cost and risk from that point. Quoted EXW prices look low because they leave out everything after the factory gate.
EXW can work if you have a trusted forwarder in China who handles pickup and export clearance. For a first order it is often the hardest option to manage, because you have to coordinate pickup, export documents and loading from another country. Many suppliers also prefer not to quote EXW for export orders, since the export paperwork then sits with a foreign buyer.
FOB: Free On Board
Under FOB the seller delivers the goods on board the vessel you name at the named port of shipment, having cleared them for export. From that moment the risk is yours. You book the sea freight, pay it, and arrange insurance if you want it.
FOB is the term importers most often use as a baseline, for three reasons. The supplier handles the part it knows best, which is local transport and export clearance in China. You keep control of the shipping line, schedule and freight cost. And FOB prices from different suppliers are directly comparable. Two points to check: the named port must be specific, and FOB is designed for sea and inland waterway transport. For goods packed into containers, the Incoterms rules suggest considering FCA instead, because the handover happens at a terminal before loading.
CIF: Cost, Insurance and Freight
Under CIF the seller books and pays the sea freight to the named destination port and buys insurance. It sounds like the simplest option, but there are two catches. Risk still passes to you when the goods are loaded in China, long before they reach Bangladesh. And the insurance the seller must buy under Incoterms 2020 is only minimum cover, so you may want extra protection.
CIF also gives the supplier control over the carrier, so you have less say in the shipping line or schedule. It can be convenient for small, simple shipments, but compare the freight element against an independent quote before accepting it.
Which term should you ask for?
- Ask for FOB when you have, or can appoint, a freight forwarder and want comparable prices and control of shipping.
- Consider CIF when the shipment is small or simple and you value having one party arrange freight, as long as you check the freight cost and insurance level.
- Use EXW only when you have an agent or forwarder in China who will handle pickup, export clearance and loading for you.
Whichever you choose, ask every supplier to quote the same term and the same named port so the numbers line up.
Common Incoterm mistakes
- Comparing an EXW price with an FOB price. The EXW figure leaves out costs the FOB figure includes.
- Leaving the named place vague. “FOB China” is not enough; name the port.
- Assuming CIF means the seller is responsible until arrival. Risk passes at loading.
- Forgetting Bangladesh-side costs. None of these terms covers import duties, taxes or local clearance. See importing from China to Bangladesh step by step.
- Skipping insurance under FOB or EXW. If you do not arrange cover, the goods are uninsured while risk is yours.
- Not writing the term into the contract. State the term, the place and “Incoterms 2020”.
Where Jingxin Sourcing fits
Jingxin Sourcing has a Head Office in Dhaka and a China Office in Yiwu. For Bangladesh importers, Jingxin can help coordinate import documents and customs-related steps and support quotation comparison. See the full guide to sourcing products from China for where shipping terms fit in the overall process, and what MOQ means for how order size affects the price you are quoted.
FAQ
Which Incoterm is cheapest for importing from China?
EXW usually shows the lowest quoted price, but only because it leaves out the most costs. The cheapest total landed cost depends on freight, insurance, clearance and fees, so compare terms on a landed-cost basis rather than the headline price.
Is FOB or CIF better for a first order?
It depends on your support in shipping. FOB gives more control and comparable prices if you have a forwarder. CIF is simpler if you do not, but check the freight element and the insurance cover.
Does CIF include import duty in Bangladesh?
No. CIF covers freight and minimum insurance to the named destination port. Import duties, taxes and local clearance remain with the buyer.
When does risk pass to me under FOB?
When the goods are on board the vessel at the named port of shipment. After that, loss or damage is the buyer’s risk, which is why many buyers arrange cargo insurance.
Should I use Incoterms 2020 or an older edition?
State the edition in the contract. Incoterms 2020 is the edition this guide uses. If your supplier quotes under another edition, confirm in writing which rules apply.
