The Incoterm on your invoice decides three separate things: who arranges transport, who pays for which leg, and at what point the risk of loss moves from us to you. Those three do not always move together, and that is where most first-time confusion comes from.
This page covers the four terms we work with — EXW, FOB, CFR and CIF — from the buyer side. It is the long version of the Incoterms answer in our FAQ: that entry tells you which terms we support and what we usually recommend; this one explains what each term actually obliges each side to do. The shipping page covers modes, transit time and clearance in overview. Use this page when you are about to agree a term and want to know what you are signing up for.
Incoterms are published by the International Chamber of Commerce and revised periodically. Name the version on the contract — for example "FOB Ningbo, Incoterms 2020" — so that both sides are reading the same rule set. The ICC page above is the primary source if you want to read the rule text yourself rather than a summary of it.
The one thing to understand first
Paying for freight and carrying the risk are two different questions.
Under CFR and CIF we pay the ocean freight to your port. That does not mean we carry the risk until your port. Under both terms the risk passes when the goods are loaded on board at the Chinese port of shipment. If the vessel has a problem mid-ocean, the cargo is at your risk even though the freight was on our invoice.
This is not a trap; it is how the rules are written. But buyers who assume "they paid the freight, so it is their problem until it lands" get an unpleasant surprise at exactly the wrong moment. If you take nothing else from this page, take this.
EXW — Ex Works
You collect from us. We make the tea available packed and marked at our premises; everything after that is yours to arrange, including export clearance in China.
What we do. Pack, mark, and make the goods available on the agreed date. Issue the invoice and packing list.
What you do. Appoint a forwarder with a presence in China, arrange collection, handle Chinese export formalities, and carry everything from the moment the goods are placed at your disposal.
When it makes sense. You already have a freight partner in China who has done this before, and you want full control of the chain.
What to watch. Export clearance is the awkward part. A buyer without a Chinese agent cannot practically lodge a Chinese export declaration. In practice this means EXW usually needs your forwarder to act for you locally — confirm they can before you agree the term.
FOB — Free On Board
We deliver the goods on board the vessel you nominate at the Chinese port of shipment, cleared for export. From that point the shipment is yours.
What we do. Pack, arrange inland transport to the port, handle Chinese export clearance and formalities, and load on board.
What you do. Nominate the vessel and the forwarder, pay the ocean freight, arrange your own cargo insurance, and handle everything from the destination side.
When it makes sense. Most first shipments. You see the freight quotation directly instead of embedded in a single number, which makes it far easier to judge whether the total is reasonable — and to compare suppliers on the tea rather than on their freight markup.
What to watch. There is no insurance certificate from us on FOB, because the cover is yours to arrange. Arrange it before the goods are loaded, not after.
CFR — Cost and Freight
We arrange and pay the ocean freight to your named destination port. Risk still passes on loading at the Chinese port.
What we do. Everything under FOB, plus book the ocean carriage and pay the freight to the named port.
What you do. Insure the cargo, then handle import clearance, duties and onward delivery.
When it makes sense. You want one invoice covering tea and freight, but you have your own insurance arrangement — for example an annual open cover through your broker that is better than anything bought per shipment.
What to watch. CFR is the term where the pay-versus-risk gap bites hardest, because there is no insurance in the package to soften it. If you take CFR, make sure the cover is actually in place from the loading port, not from arrival.
CIF — Cost, Insurance and Freight
CFR plus marine cargo insurance arranged on your behalf. Risk still passes on loading.
What we do. Everything under CFR, plus arrange cargo insurance and provide the insurance certificate as part of the document set.
What you do. Import clearance, duties, and onward delivery from your port.
When it makes sense. You want a single all-in figure to your port and do not want to manage freight or insurance separately. For a small first order this is often the least administrative work.
What to watch. Under CIF the seller's default obligation is minimum cover — Institute Cargo Clauses (C) — not all-risks. CIP was raised to Clauses (A) in the 2020 revision; CIF was not. If you want all-risks cover, ask for it at quotation stage and expect it to be priced in. Confirm the level of cover and the claims route before you need them: insurance covers the cargo, not your commercial disappointment, and a claim needs evidence that is far easier to gather if you know in advance what the policy asks for.
Choosing, in practice
- First shipment, you want to learn the chain. FOB. You will understand your real landed cost by the end of it.
- First shipment, you want the least admin. CIF. Fewer moving parts, one number.
- You already ship from China regularly. FOB or EXW, depending on how much your forwarder does for you locally.
- You have your own annual cargo policy. CFR, so you are not paying twice for insurance.
There is no term that is generally "better". There is a term that matches how much of the chain you want to run.
What to confirm before you agree
- The term and the named place — "FOB" alone is incomplete. "FOB Ningbo" is a term. So is "CIF Rotterdam".
- The Incoterms version, written on the contract and the invoice.
- Who insures, and from which point. This is the question that decides what happens on a bad day.
- Whether your broker needs anything specific on the invoice for the entry — tell us before we issue it, not after.
If you are unsure which term to ask for, tell us the destination port and roughly how much you are ordering, and we will set out what each option would look like for that shipment. Evaluation samples are free of charge; the buyer covers the courier cost. Most teas can be ordered from 5 kg.
You can browse origin lots by category in the tea catalogue — the specification on each product page includes the export packing that these terms move.