What an Incoterm actually decides
An Incoterm answers two questions: who pays each leg of the journey, and at which point the risk of loss transfers from seller to buyer. It does not decide who owns the goods, and it is not a payment term: those are separate clauses in your contract.
The four you will meet
- EXW (Ex Works): you collect at the factory door and pay for everything after it. Cheapest headline price, most work for you.
- FOB (Free On Board): the supplier delivers to the port and clears export. The most common term for container shipments from China.
- CIF (Cost, Insurance and Freight): the supplier also pays sea freight and insurance to your port, but you inherit destination charges you did not negotiate.
- DDP (Delivered Duty Paid): the supplier delivers to your door, duties paid. Simplest for you, and the term where hidden margin most often sits.
Why FOB is usually the sane default
Under FOB you compare suppliers on the part of the cost they control (the goods and the trip to the port), and you keep control of the freight leg, where your own forwarder can often beat the supplier's quote and will answer your calls when a shipment is late.
CIF quotes look cheaper and frequently are not: the destination handling charges land on your invoice at the other end, chosen by someone who is not paying them.
Always write the port and the year
'FOB' alone is incomplete. Write 'FOB Shenzhen, Incoterms 2020' on the proforma invoice. The named place is what makes the term enforceable, and the year tells everyone which rule book applies.