FOB vs CIF vs EXW —
Trade Terms Explained for Yarn Buyers
You get two quotations for the same yarn: one says "FOB Xiamen $2.10/kg", the other says "CIF Los Angeles $2.45/kg". Which is actually cheaper? Who arranges the shipping? Who's responsible if the container is damaged at sea? These three letters — the Incoterm — answer all of that, and getting them wrong can cost you money and create real risk. 🚢
This guide explains the three trade terms you'll encounter most often buying yarn from China — EXW, FOB and CIF — in plain language: who does what, who pays for what, and who bears the risk at each stage. ✅
📖 What Are Incoterms?
Incoterms (International Commercial Terms) are a standardised set of three-letter trade terms published by the International Chamber of Commerce (ICC), used worldwide to define exactly where the seller's responsibility ends and the buyer's begins — for cost, risk and logistics. There are 11 official Incoterms, but in the yarn trade, three cover the vast majority of deals: EXW, FOB, and CIF. 🌍
🗺️ The Shipping Journey — Where Each Term Hands Off
Think of the yarn's journey from the factory in China to your warehouse as a single line. Each Incoterm marks a different point where the seller's job ends and yours begins: 📍
Xiamen
Loading
Vessel
Destination
Warehouse
📋 The Three Terms — In Detail
A common misunderstanding with CIF: even though the seller pays for freight and insurance to the destination port, the risk transfers to the buyer as soon as goods are loaded onto the vessel at origin — same point as FOB. If the ship sinks after loading, the buyer bears the risk (which is why "minimum insurance" is included — but it may not cover your full value). This split between "who pays" and "who bears risk" is the most confused part of CIF.
📊 Who Does What — Full Responsibility Breakdown
| Responsibility | EXW | FOB | CIF |
|---|---|---|---|
| Export packaging | Seller | Seller | Seller |
| Domestic transport to port | Buyer | Seller | Seller |
| Export customs clearance | Buyer | Seller | Seller |
| Origin port / terminal fees | Buyer | Seller | Seller |
| Loading onto vessel | Buyer | Seller | Seller |
| Ocean freight | Buyer | Buyer | Seller |
| Marine insurance | Buyer | Buyer | Seller (minimum cover) |
| Risk transfer point | At seller's factory | Once loaded on vessel | Once loaded on vessel |
| Import customs clearance | Buyer | Buyer | Buyer |
| Destination port fees | Buyer | Buyer | Buyer |
| Final delivery to warehouse | Buyer | Buyer | Buyer |
🎯 Which Term Should You Choose?
| Your Situation | Recommended Term | Why |
|---|---|---|
| First-time importer, no freight forwarder | CIF | Simplest — seller handles freight & insurance, you just clear customs on arrival |
| Established importer with own forwarder | FOB | More cost control & often cheaper freight through your own agent |
| Large-volume regular buyer | FOB | Better freight rates negotiated directly with carriers at volume |
| Want maximum price comparison ease | FOB | Easier to compare supplier ex-factory pricing without freight variables mixed in |
| Trader wanting simplest paperwork | CIF | Fewer moving parts, one combined price, less coordination |
| Sourcing multiple products, own logistics network | EXW | Full control if you already consolidate shipments from various factories |
For most fabric mills and importers buying yarn from China, FOB is the sweet spot — the supplier handles the parts they know best (export logistics, customs), and you (or your forwarder) handle international freight where you may get better rates through your own relationships. CIF is a great starting point if you're new to importing and want fewer parties to coordinate. EXW is generally only worth it if you already have an efficient China-based logistics setup.
🧮 How to Fairly Compare EXW vs FOB vs CIF Quotes
When suppliers quote different terms, comparing "price per kg" directly is misleading. Here's how to compare fairly: 📊
- 1️⃣ Convert everything to the same term. Ask each supplier for their FOB price (or ask your forwarder for freight cost to add to an EXW quote) so you're comparing apples to apples
- 2️⃣ Ask what's included. Some "FOB" quotes quietly exclude certain port charges — always ask for a clear breakdown
- 3️⃣ Factor in your own logistics cost/effort. A slightly higher CIF price might be cheaper overall than EXW once you account for your own freight-arranging time and risk
- 4️⃣ Check the insurance level. CIF's "minimum insurance" (typically 110% of invoice value, ICC Clause C) may be less than you want — you can request upgraded cover for a small extra cost
📎 Other Terms You Might Encounter
| Term | Full Name | Quick Explanation |
|---|---|---|
| CFR / C&F | Cost and Freight | Like CIF but WITHOUT insurance — seller pays freight, buyer arranges own insurance |
| DDP | Delivered Duty Paid | Seller handles everything, including import duty, right to buyer's door — maximum convenience, higher price |
| DAP | Delivered at Place | Seller delivers to named destination, but buyer handles import duty/customs |
| FCA | Free Carrier | Similar to FOB but flexible for any transport mode, not just sea — increasingly used instead of FOB per Incoterms 2020 |
Yaakan quotes primarily FOB Xiamen, and can also arrange CIF to your destination port on request — we work with reliable freight forwarders for major routes to help first-time buyers get a simple, all-in quote. Whichever term works best for you, we'll make sure the terms and responsibilities are crystal clear in your Proforma Invoice before you commit. See our import guide for the full purchasing process.
📝 Summary
- 📖 Incoterms define where the seller's responsibility for cost and risk ends, and the buyer's begins
- 🏭 EXW — seller's job ends at their factory; buyer arranges everything else (max buyer effort, lowest quoted price)
- 🚢 FOB — seller handles export logistics up to loading on vessel; buyer arranges ocean freight (most common term)
- 📦 CIF — seller arranges freight & minimum insurance to destination port; buyer handles import (simplest for new importers)
- ⚠️ CIF risk quirk: risk transfers at loading (same as FOB) even though seller still pays freight to destination
- 🧮 Compare fairly: convert quotes to the same term before comparing prices between suppliers
- 🎯 Recommendation: FOB for experienced importers with their own forwarder; CIF for first-timers
Need a quote in FOB, CIF or another term? Contact Yaakan — we'll give you a clear, itemised quote so you know exactly what's included. Free samples available too. 👇
Get a Clear FOB or CIF Quote
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