Incoterms determine who pays for shipping, insurance, and customs — and getting them wrong can cost you thousands. Here's what every Australian importer needs to know about Incoterms 2020.
Incoterms — International Commercial Terms — are a set of standardised trade terms published by the International Chamber of Commerce. They define who is responsible for costs, insurance, and risk at each stage of an international shipment. For Australian importers sourcing from China and Vietnam, understanding Incoterms is essential for calculating accurate landed costs and avoiding unexpected charges.
FOB (Free on Board) — The seller is responsible for the goods until they are loaded onto the vessel at the origin port. The buyer (you) takes responsibility from that point. Most Australian importers use FOB when working with a freight forwarder.
CIF (Cost, Insurance, Freight) — The seller arranges and pays for freight and insurance to the destination port. You take responsibility once the goods arrive. CIF is simpler but gives you less control over freight costs and carriers.
EXW (Ex Works) — The seller's responsibility ends at their factory gate. You arrange and pay for all transport from that point. EXW gives maximum control but maximum responsibility.
DDP (Delivered Duty Paid) — The seller is responsible for everything, including import duties, until the goods are delivered to your door. DDP is the simplest option but often the most expensive.
FOB is the most commonly recommended Incoterm for Australian importers from China. It lets you control your freight forwarder and carrier selection, which gives you visibility over costs and transit times. CIF can work for smaller or less experienced importers who prefer the simplicity of the seller handling freight.
Your landed cost is the total cost of a product by the time it reaches your warehouse in Australia. This includes factory price, freight, insurance, import duty, GST, and customs clearance fees. The Incoterm you agree with your supplier directly determines which of these costs are your responsibility and which are theirs.
FOB, CIF, CFR, and FAS apply specifically to sea and inland waterway transport. EXW, DAP, DDP, and CPT apply to all transport modes including air. When shipping by air from China to Australia, EXW or DAP terms are most common.
Most Chinese factories default to offering FOB pricing. Always clarify which port is being referenced — FOB Shenzhen versus FOB Shanghai will result in different prices. Get the full port name in writing to avoid disputes over responsibilities.
Understanding Incoterms is the first step — the next is having the right logistics partner. Epic Sourcing offers a dedicated freight forwarding service from China and Vietnam to Australia, covering all major Incoterms arrangements. For shipments that need consolidation before departure, our China warehousing and 3PL service stores and prepares your goods in-country.
