Incoterms 2020 for CNC Parts Buyers: EXW, FOB, CIF Explained
What changes at each line, what customs actually needs, and the payment terms that match the risk — from the shop that ships every week.
EXW, FOB, CIF, DAP — what changes at each line
The Incoterm decides one thing: where risk and cost transfer from seller to buyer. EXW (Ex Works) means you pick it up at our dock — risk and cost transfer the moment it leaves the building. FOB (Free On Board) means we deliver to the port and load the container; risk transfers when the goods cross the ship rail, and ocean freight, insurance and destination costs are yours. CIF adds insurance and freight to the port — but risk still transfers at the ship, so insurance covers your exposure, not ours.
DAP (Delivered At Place) means we deliver to your door, unloaded; you handle import clearance and duties. DDP (Delivered Duty Paid) is the full package — we clear customs and pay duties and VAT, and you receive the goods with the price you approved. For most first-time importers, DDP is the least surprising term: the quote is the total cost, and there are no customs surprises at delivery.
What actually happens at customs
Every shipment needs three documents: the commercial invoice (describing goods, value, HTS codes), the packing list (weights, dimensions, cartons), and the certificate of origin (for tariff preference programmes). We prepare all three as standard. The buyer's customs broker uses them to classify the goods and calculate duty — typically 0–7.5% for machined metal parts depending on the HTS line.
The two surprises we see most: under-declared value (the broker declares less to save duty, and customs holds the shipment for inspection) and missing certificate of origin (which forfeits preferential duty rates that were already in the price). Both are paperwork problems, not logistics problems — and both are why we send the full document set with every order, every time.
Payment terms that match the risk
For new relationships the standard is T/T 30% deposit, balance before shipment — the deposit covers material and machine time, the balance releases the shipment. For prototype orders under a few hundred dollars, PayPal is simpler. Letters of credit exist and work, but the bank fees and document checking usually cost more than the risk they remove on orders of this size.
As a relationship matures, the terms can follow: net 30 on production orders for customers with a payment history, consignment stock for high-volume repeat lines. The Incoterm and the payment term are separate decisions — fix the risk line first (DDP or FOB), then negotiate who finances the float. We quote on EXW or FOB Xi'an by default and DDP on request.
How we ship, in practice
Under about 20 kg, DHL Express or FedEx International Priority: 3–5 working days door-to-door, tracking from pickup to delivery. Above that, air freight consolidates weekly. Sea freight (FOB or CIF terms) makes sense for pallet volumes or when the schedule allows 20–35 days — the freight cost drops by an order of magnitude. We quote both and let the delivery date decide.
The pragmatic advice for a first order: take DDP, take Express, and check the landed cost against your budget before approving. Once the parts are moving regularly, you can tune the terms to the volumes. The trade-off between speed and cost is yours to make — the quote should make both visible.
Quote with the term you want
Tell us EXW, FOB or DDP — the price reflects the risk line.
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