FOB vs CIF vs DDP: Incoterms Explained for Cosmetics Importers
Plain-English breakdown of FOB, CIF, EXW and DDP for cosmetics importers — who pays what, who bears risk, and which terms protect first-time buyers.
Incoterms decide who pays freight, who insures the goods and who eats the loss if a container falls overboard. Get them wrong on your first order and the "great price" your supplier quoted can balloon by 30%.
The four terms you'll actually see
EXW — Ex Works
You collect the goods from the factory door. You pay export clearance, trucking, freight, insurance, import duty, last-mile.
- When it's used: Almost never for first-time buyers. Avoid.
- Hidden cost: China export clearance requires a Chinese entity — you'll end up paying a forwarder to do it anyway.
FOB — Free On Board (port of departure)
Supplier delivers the goods onto the ship at a Chinese port (e.g. FOB Shenzhen). Risk transfers to you the moment goods cross the ship's rail.
- When it's used: ~70% of B2B cosmetics orders.
- You pay: Sea freight, marine insurance, destination port fees, import duty, last-mile.
- You control: Your freight forwarder, your insurance — typically cheaper than supplier's.
CIF — Cost, Insurance, Freight (port of arrival)
Supplier pays freight and minimum insurance to your destination port. Risk still transfers at origin.
- When it's used: Beginners who want one invoice covering goods + freight.
- Watch out: Supplier picks the forwarder — they often mark up freight by 20–40%, and the destination port fees are billed to you on arrival.
DDP — Delivered Duty Paid
Supplier ships goods all the way to your door, pays duty, pays last-mile. You receive a carton at your warehouse and pay nothing extra.
- When it's used: Amazon FBA sellers, low-volume importers, sample orders.
- Watch out: "DDP includes duty" — verify it does include your country's specific HS code duty, not a generic estimate.
Quick comparison
| Term | Supplier pays | You pay | Risk transfers at |
|---|---|---|---|
| EXW | Nothing | Everything | Factory door |
| FOB | Export + loading | Freight + onward | Ship's rail (origin port) |
| CIF | Freight + min insurance | Destination port fees + duty + last-mile | Ship's rail (origin port) |
| DDP | Everything | Nothing | Your door |
Which term to choose
| Scenario | Best term |
|---|---|
| Sample order, under 50 kg | DDP via courier |
| First container, want simplicity | DDP if supplier is reliable, otherwise FOB |
| Repeat orders, you have a forwarder | FOB |
| Multiple suppliers consolidated in China | FOB to one forwarder |
| Ultra cost-sensitive, you have China entity | EXW |
Hazmat / cosmetics gotchas
- Nail polish, perfume, aerosols = DG (Dangerous Goods). Surcharges $300–$1,200 per shipment. Always confirm before quoting freight.
- Eyeshadow palettes with mirrors → fragile insurance rider recommended.
- Liquid foundations over 100 ml → may trigger air-freight restrictions.
Practical advice for your next PO
- For first 1–2 orders: DDP. You pay slightly more, but you sleep at night.
- Once you have a trusted forwarder: switch to FOB, save 15–25%.
- Never accept CIF unless you've benchmarked the freight rate independently — it's where suppliers hide margin.
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