What do EXW, FOB and CIF mean, and which should I choose?

Question

Accepted Answer

Short Answer: EXW Is Cheapest but Most Work; FOB Is the Balanced Default; CIF Adds Freight Risk

Direct Answer

EXW (ex-works) means you collect goods at the factory gate, so you control everything after but arrange all transport yourself. FOB (free on board) means the seller delivers goods loaded onto the ship at the Chinese port, the standard choice for control and cost. CIF (cost, insurance, freight) means the seller pays ocean freight and insurance to your port, simpler but usually more expensive and harder to insure separately.

The Three Incoterms in Plain English

These are Incoterms, the standard who-pays-for-what rules in international trade. The difference is simply where responsibility and cost transfer from seller to buyer.

Term	Seller pays until	Buyer handles from
EXW	Goods at factory gate	Everything: pickup, export, freight, import
FOB	Goods loaded on vessel at CN port	Ocean freight, insurance, import
CIF	Goods + freight + insurance to dest port	Import clearance, last-mile

A shipping container being loaded at a Chinese port — FOB transfers responsibility once goods are on the vessel at the port.

Which to Choose

Choose EXW if

You have your own freight forwarder
You want maximum control of cost
You consolidate many factories

Choose FOB if

You want a clear cost split
You book your own freight (no markup)
You are a first-time importer

Choose CIF if

You want one invoice, less admin
Shipment is small / simple
You trust the seller's freight rate

Why FOB Is the Default for Most

FOB gives you a clean breakpoint at the Chinese port. You book ocean freight yourself, so no agent or seller can hide margin in shipping, and you keep control of the carrier and the timeline. For first-time importers it is the safest balance of cost and simplicity.

FOBRecommendedControl + no freight markup

EXWAdvancedMax savings, max admin

CIFConvenientSimple but pricier

A notebook sketch of three shipping terms on a desk — EXW, FOB and CIF split cost at different points in the journey.

The CIF Insurance Trap

Seller chooses the insurer You may not be the named insured, complicating claims.
Freight markup built in CIF often hides a 10-30% spread on ocean rates.
Hard to compare carriers You cannot shop freight if the seller books it.

Case: FOB Saved the Timeline

Importer: US furniture seller, 2x 40ft

A CIF quote looked simpler but the seller's carrier had a 3-week wait. Switching to FOB let the buyer's forwarder book a 10-day sailing at a lower all-in rate, and the insurance was in the buyer's own name.

OutcomeDelivered 11 days earlier and $740 cheaper all-in.

A freight forwarder booking screen on a laptop — Booking your own freight under FOB avoids hidden markup.

How RND SOURCING Handles Terms

We quote in the Incoterm you prefer and most often recommend FOB so you keep freight control. When you want EXW we coordinate pickup and export declaration; when you want CIF we still show the carrier rate so the margin is visible. Our consolidation across Yiwu means many small EXW pickups become one efficient export.

Talk terms with our desk

RND SOURCING — Yiwu, Zhejiang, China. Written by our sourcing desk from first-hand market work.