When a Chinese supplier sends a quote reading "USD 5.00/unit FOB Guangzhou", many first-time importers read that as the final price. It is not. The Incoterm defines how far the supplier's responsibility goes, and where yours begins. Choosing the wrong Incoterm can leave the real cost a long way from what you expected.
Incoterms (International Commercial Terms) are a set of rules published by the International Chamber of Commerce (ICC) that standardise the language of foreign trade. The current version is Incoterms 2020. This guide covers the ones that come up most often when importing from China and how each affects your landed cost.
The Incoterms most used when importing from China
At the supplier's factory
The supplier makes the goods available at its factory. The whole logistics chain, collection, export clearance, freight and insurance, falls to the importer.
Most responsibility on the importerOn board the vessel at the origin port
The supplier delivers on board the vessel at the Chinese port. From there on, the importer pays the international freight and the insurance.
The right balance for most buyersCost and freight to the destination port
The supplier pays the freight to the Brazilian port, but the risk on the cargo passes to the importer as soon as the vessel sails.
Freight included, insurance notCost, insurance and freight to the destination port
The supplier includes freight and minimum insurance. It is also the basis for the Brazilian customs value when the purchase was made on FOB terms.
Convenient, but less controlDelivered at the agreed place (not cleared)
The supplier delivers to the importer's address in Brazil, but without paying import taxes: customs clearance is down to the importer.
Rare on China-Brazil shipmentsDelivered with all duties paid
The supplier delivers at destination with everything paid: freight, insurance and taxes. Maximum convenience, but rarely offered for Brazil.
Maximum convenience for the importerTable of responsibilities by Incoterm
Who pays for each stage of the logistics chain, depending on the Incoterm agreed. Green = supplier · Red = importer
| Stage | EXW | FOB | CFR | CIF | DAP | DDP |
|---|---|---|---|---|---|---|
| Packing and marking | Suppl. | Suppl. | Suppl. | Suppl. | Suppl. | Suppl. |
| Loading at the factory | Imp. | Suppl. | Suppl. | Suppl. | Suppl. | Suppl. |
| Inland haulage to the port | Imp. | Suppl. | Suppl. | Suppl. | Suppl. | Suppl. |
| Export clearance | Imp. | Suppl. | Suppl. | Suppl. | Suppl. | Suppl. |
| International freight | Imp. | Imp. | Suppl. | Suppl. | Suppl. | Suppl. |
| Cargo insurance | Imp. | Imp. | Imp. | Suppl. (min.) | Imp. | Suppl. |
| Import clearance | Imp. | Imp. | Imp. | Imp. | Imp. | Suppl. |
| Import taxes (II, IPI, ICMS…) | Imp. | Imp. | Imp. | Imp. | Imp. | Suppl. |
| Inland haulage in Brazil | Imp. | Imp. | Imp. | Imp. | Suppl. | Suppl. |
FOB vs. CIF: which one to choose?
This is the most frequent and most important choice the Brazilian importer faces. The two Incoterms carry an equivalent customs cost; what changes is who contracts and pays for the freight and the insurance, and how much control you have over it.
- You choose the shipping line and can negotiate the freight rate
- You can consolidate cargo from several suppliers into the same container
- You take out the insurance with the insurer you prefer, with cover suited to the product
- Full transparency: you know exactly what you paid for each component
- With volume, the freight forwarder offers better rates than any single supplier can get
- Very small orders (LCL): the supplier may have a more competitive rate as a regular customer of the shipping line
- A first order with a new supplier: it cuts your initial operational load
- When you have no established freight forwarder and need to keep the process simple
- Low-value products where the freight difference is immaterial in the total cost
Watch the insurance under CIF: the supplier is only obliged to take out minimum cover, which insures 110% of the CIF value on a basic policy. For fragile or high-value products, take out additional insurance yourself, whatever Incoterm you agreed.
EXW: more control, more responsibility
EXW is the Incoterm where the importer has maximum control over the whole logistics chain, but also takes on all responsibility from the moment the goods leave the factory. In practice that means you need a local freight agent in China to collect at the factory, handle export clearance and deliver the cargo to the port.
For Brazilian importers with no local presence in China, EXW is operationally complex. The exception is companies that have a buying agent or representative in the country, such as BCVN, which can coordinate the entire logistics chain on the Chinese side.
A frequent EXW trap: the supplier may refuse to handle export clearance (which under EXW is the importer's responsibility), and some Chinese customs authorities require the registered exporter to be a Chinese company. In that case, even under EXW, the supplier ends up being drawn into the process, which creates ambiguity. FOB is cleaner in most scenarios.
Impact on the customs value and the taxes
This is the point that confuses first-time importers most: the customs value in Brazil is always calculated on a CIF basis, whatever Incoterm the purchase was made on.
If you bought on FOB terms, you must declare on the DI a CIF value equal to the FOB price plus international freight plus insurance. Buying FOB does not reduce the customs value; it only means you paid for freight and insurance separately.
Example: a product priced at USD 10.00/unit × 1,000 units FOB
If the same product had been bought from the supplier at CIF USD 11.50/unit, the customs value would be USD 11,500 and the taxes slightly higher. CIF is not always cheaper for the importer: it depends on how much margin the supplier built into the freight.
Practical tip: when you receive a CIF quote, ask for the FOB quote on the same product as well. Add the freight and insurance you would arrange yourself and compare the two totals. FOB with your own freight usually comes out the same or cheaper, and you keep control over the quality of the logistics service.
DDP: what to check before accepting the offer
Some suppliers, particularly B2B e-commerce platforms and trading agents, offer "delivery in Brazil with taxes included". Before accepting, check:
- Does the price really include II, IPI, ICMS and PIS/COFINS? The Brazilian tax burden can reach 80% to 100% of the FOB value. A supplier offering DDP at a reasonable price is very probably not including every tax
- Which customs regime is being used? Some "DDP" operations run on under-invoicing or irregular regimes, which exposes the importer to tax assessments
- Who is the registered importer? Under DDP, the exporter legally acts as the importer. In practice, for Brazil, Chinese suppliers rarely carry that out in full and lawfully
The most common mistakes with Incoterms
1. Comparing FOB and CIF prices as if they were equivalent. "Supplier A charges USD 8 FOB and B charges USD 8.50 CIF, so A is cheaper." That only holds if freight and insurance cost less than USD 0.50/unit. Always convert everything to CIF before comparing.
2. Declaring the FOB value as the customs value. The Receita Federal requires the CIF value. Declaring only the FOB figure is under-invoicing, a customs offence carrying a fine of 75% to 150% of the taxes due, on top of forfeiture of the goods.
3. Not taking out additional insurance under CIF. The minimum cover required under CIF (ICC C or equivalent) insures only basic risks. Water damage, theft, damage from poor handling and other frequent risks may not be covered. For valuable products, always top up the insurance.
4. Using EXW without a local agent in China. Without a freight agent or representative on the Chinese side, operating on EXW terms is unworkable. The supplier may refuse to help with export clearance, and the goods sit at the factory with nobody to collect them.
5. Accepting DDP without checking that every tax is included. "Delivery to your door" does not necessarily mean full customs clearance. Confirm in writing which taxes are included in the DDP price before closing the order.
Frequently asked questions about Incoterms when importing from China
What is the difference between FOB and CIF when importing from China?
Under FOB (Free on Board), the supplier delivers the goods on board the vessel at the port of origin. The importer is responsible for international freight and insurance from that point on. Under CIF (Cost, Insurance and Freight), the supplier includes in the price the international freight to the destination port plus minimum cargo insurance. For calculating Brazilian taxes, the customs value is the CIF price: if the purchase was made on FOB terms, freight and insurance must be added to arrive at the customs value.
FOB or CIF: which is better for the Brazilian importer?
For most Brazilian importers, FOB is the better deal because it gives control over the freight: you choose the shipping line, negotiate the rate and can use a freight forwarder you trust. Under CIF, the supplier chooses the vessel and the minimum insurance, and can build margin into the freight. On top of that, FOB lets you compare freight quotes and negotiate better terms as your volume grows. The exception is small orders (LCL), where the supplier may have more competitive rates thanks to volume.
What does EXW mean in practice when importing from China?
EXW (Ex Works) means the supplier makes the goods available at its factory or warehouse, and the entire logistics chain, collection at the factory, transport to the port, export clearance, international freight and insurance, is the importer's responsibility. It is the Incoterm that gives the buyer the most control, but also the most operational responsibility. For Brazilian importers without a local agent in China, EXW can be operationally complex. FOB is the more practical alternative.
How does the Incoterm affect the customs value and the taxes?
The Brazilian customs value is calculated on a CIF basis (cost plus insurance plus freight to the Brazilian port). If the purchase was made on FOB terms, the importer must add international freight and insurance to the FOB price to declare the correct customs value. Buying on CIF terms does not raise the taxes compared with FOB, because the taxable base is the same: in both cases freight and insurance form part of the customs value. What changes is who contracts and pays for those services.
What is DDP and when does a Chinese supplier offer these terms?
DDP (Delivered Duty Paid) means the supplier delivers the goods to the importer's address in Brazil, already cleared and with all taxes paid. It is the most convenient arrangement for the importer, but Chinese suppliers rarely offer it for Brazil, because it requires them to operate inside the Brazilian tax system. When a supplier offers 'delivery in Brazil with taxes included', check whether the price really covers every tax (II, IPI, ICMS, PIS/COFINS) or whether it is merely door-to-door freight without full customs clearance.