Author: Tanvir Akhtar

When dealing with suppliers from China, you’ll be offered 4 types of pricing:

FOB – Free on Board (or Freight on Board). This basically means that the cost of delivering the goods to the nearest port is included but YOU, as the buyer, are responsible for the shipping from there and all other fees associated with getting the goods to your country/address.

EXW (Ex-Works) – also sometimes referred to as the Ex-Factory price. This basically means the cost of the product and nothing else! No shipping costs or export fees in China are included in this price, never mind local port and custom fees or delivery to your door.

CIF – Cost, Insurance and Freight. In this case, the price also includes sea freight charges and insurance to deliver the goods to YOUR nearest port. But only to the port – from that point onwards, you take the shipment into your hands.

CNF – Cost & Freight (or Cost, no Insurance, Freight). Similar to CIF only this time insurance is not included.

If your supplier quoted you a CNF London price, this means that the price includes shipping of the goods via sea freight to London port. When the goods arrive, you’ll have to organise customs clearance and delivery to your home/office/warehouse.

While the CNF price can look very attractive, keep in mind that there will be other costs involved when your goods arrive in London, such as:

Customs clearance fee
Value Added Tax
Import Duty
Port security charge
Fuel surcharge
Docking charge
Warehouse storage fee
Etc.
So the CNF price is really just the tip of the iceberg and does not show you the true, FINAL price you’ll pay for the products you’re importing.

Also, as you’re new to importing, it will take extra time and be a lot of hassle for you to organise everything at London’s port.

f your supplier quoted you an Ex-Works price, this means that there will be LOTS of hidden charges in China + the actual freight charge + all the additional charges I already covered under CNF. This really is NOT the way to do business! You’ll never know for sure how much your import will cost in total, so please NEVER deal with Ex-Works prices!!!

A much better alternative to CNF, FOB, CIF and Ex-Works is to use a freight forwarding agent for your shipments from China. These companies will take care of EVERYTHING mentioned above and will deliver the goods to your door without you having to mess around with the customs clearance procedure.

You usually receive an invoice from them once your goods have arrived with all taxes, customs & port fees clearly listed.

I highly recommend you use such a company, at least for your first few importing deals. These freight forwarding companies are very affordable and can actually work out cheaper than if you try to do it all on your own.

What is ‘Ex Works (EXW)’
Ex Works (EXW) is an international trade term that describes an agreement in which the seller is required to make goods ready for pickup at his or her own place of business. All other transportation costs and risks are assumed by the buyer.

BREAKING DOWN ‘Ex Works (EXW)’
This arrangement is extremely favorable to the seller at the buyer’s expense. The seller is only responsible for packaging the goods and making them available at a designated location, such as the seller’s warehouse. He or she must also help the buyer obtain export licenses or other necessary documentation, but at the buyer’s expense.

Once the goods have been placed at the buyer’s disposal, the buyer is responsible for all costs and risks related to the goods. In practice, this means loading them onto a truck, transferring them to a train, ship or plane, perhaps multiple times, handling customs procedures, unloading them at their destination and storing, using or reselling them, as the case may be. Even if the seller does help the buyer by loading the goods onto a truck, for example, the buyer is the one liable for damage during this process.

EXW (Ex Works)

EXW price is the factory price for the products with no shipping is included. The buyer must arrange transportation all the way from the factory floor in China to the final destination.

Export clearance: No
Transport to Port of Loading in China: No
Sea Freight charges: No
Port of discharge charges: No
Inland transport: No

CNF means “cost and freight” or “cost net freight” and a CNF price includes the cost of shipping to the buyer. CNF is a term used in the export business and may also be indicated as C&F or CFR.

CFR (Cost and Freight)
This term formerly known as CNF (C&F) defines two distinct and separate responsibilities-one is dealing with the actual cost of merchandise “C” and the other “F” refers to the freight charges to a predetermined destination point. It is the shipper/seller’s responsibility to get goods from their door to the port of destination. “Delivery” is accomplished at this time. It is the buyer’s responsibility to cover insurance from the port of origin or port of shipment to buyer’s door. Given that the shipper is responsible for transportation, the shipper also chooses the forwarder.

Cost, insurance and freight (CIF) is a trade term requiring the seller to arrange for the carriage of goods by sea to a port of destination and provide the buyer with the documents necessary to obtain the goods from the carrier.The supplier arranges delivery to the Port of Destination in the importer’s country. However, Cost Insurance Freight does not include unloading, LCL charges, CSIF or other fees added by the Destination Agent in the Port of Destination.

Export clearance: Yes
Transport to Port of Loading in China: Yes
Sea Freight charges: Yes
Port of discharge charges: No
Inland transport: No

1 . Term of sale under which the price invoiced or quoted by a seller includes all charges up to placing the goods on board a ship at the port of departure specified by the buyer. Also called collect freight, freight collect, or freight forward.
2. Used in shipping to indicate that there is no charge to the buyer for goods placed on board a carrier at the point of shipment. Typically followed by the name of a port or city, e.g., F.O.B. London.

The supplier in China delivers the cargo to the Port of Loading (Port of Loading) and takes care of the export clearance. The latter is of high importance since the Chinese Customs Authorities have the right to hold cargo that has not been properly cleared for export.

Export clearance: Yes
Transport to Port of Loading in China: Yes
Sea Freight charges: No
Port of discharge charges: No
Inland transport: No