Incoterms for a first container: FOB, EXW, DDP and the ones that cost you money

1. Which edition is in force, and the “Incoterms 2026” myth

Current edition

Incoterms® 2020, in force since 1 January 2020

Next edition

ICC began groundwork for Incoterms® 2030 in 2026; no text published

What to write in a contract

Name the edition explicitly — “FOB Ningbo (Incoterms® 2020)”

Incoterms® 2020 entered into force on 1 January 2020 and remains the edition in force as of September 2026.1 ICC's 2026 global policy workplan commits to beginning the revision that will become Incoterms® 2030, and national committees started mobilising during 2026.4 No draft text, publication date or entry-into-force date has been announced.

Which means: there is no such thing as Incoterms 2026. Pages carrying that title are 2020 content with a fresher headline, and they are a reliable signal that whoever wrote the page does not work in trade. The same applies to "Incoterms 2025" and "Incoterms 2024."

Two things changed in 2020 that still catch people out. DAT was renamed DPU — delivered at place unloaded — because the destination can be any place and not only a terminal; the distinguishing feature against DAP is simply whether the seller unloads.2 And the insurance levels split: CIP now requires cover at the broadest tier, while CIF stayed at the minimum tier.25 If someone quotes you CIF assuming it carries all-risks cover, they are working from the pre-2020 mental model.

Always name the edition in the contract. "FOB Ningbo" on its own is ambiguous across four editions spanning thirty years. "FOB Ningbo (Incoterms® 2020)" is not.

2. The eleven rules, and the two families

There are eleven rules, split into two groups by transport mode.6

The seven rules in the first family work for containerised freight. The four in the second were written for goods physically loaded across a ship's rail — grain, ore, project cargo — and the reason that distinction matters is the subject of the next section.

Here is what each of the ones you will actually be offered does. Read the "risk transfers" column more carefully than the cost column, because cost is negotiable and risk is where the disputes are.

3. Why FOB is technically the wrong rule for a container

This one is worth knowing precisely because everyone ignores it, including us, and it occasionally matters.

FOB is a sea-and-inland-waterway rule. Its delivery point is the moment the goods are on board the vessel. That made complete sense when cargo was slung over a ship's rail. It makes less sense for a container, which you hand to the carrier at a container yard days before the vessel arrives — and which then sits in a stack, at a terminal, entirely outside your control, during a period when, under a strict reading of FOB, the risk is still the seller's.

The rule that actually fits containers is FCA, where delivery happens on handover to the carrier at a named place. ICC has been saying this for years. The trade has comprehensively ignored it, because FOB is what everybody's systems, contracts and habits are built around, and because the practical difference on a clean shipment is nil.

Where it stops being nil: a container damaged or lost in the terminal stack before loading. Under FOB that loss is arguably the seller's, under FCA it is arguably yours, and under a marine policy written against the wrong term it may be nobody's. If you are moving enough volume for that to be a real exposure, FCA with a precisely named place is the correct instrument and your insurer will thank you. For a first container, use FOB, name the port, and know why it is a compromise.

4. EXW: the rule you cannot actually perform in China

What it says

Goods at your disposal at the seller's premises, not loaded

What it means in China

You owe export clearance you are not legally permitted to perform

What actually happens

The factory or an agent exports anyway, and charges you for it

EXW looks like the purest expression of buyer control: the factory hands over the goods at the gate, and everything after that is yours. Under a strict reading, the seller does not even have to load the truck, and the buyer is responsible for export clearance.

In China, that last obligation cannot be performed by you.

China's Customs Law requires that importers and exporters of goods, and customs clearing agents, be registered with Customs in order to make customs declarations — and states that an enterprise without such registration, or an individual without declaration qualification, is not permitted to engage in making declarations.7 Declarations may be made by the exporter itself or by an entrusted clearing agent registered with Customs, and an agent declaring in its own name bears the same legal liability as the exporter.7

A Canadian company with no registered Chinese entity is none of those things. So under EXW, the export declaration is made by the factory or by a registered agent regardless of what the Incoterm says. The obligation has not moved. Only the invoicing has.

The part nobody explains: the VAT rebate

There is a second, larger reason the EXW price is not the saving it appears to be. China operates an export VAT refund system, and eligibility runs through the enterprise named as exporter on the customs declaration — the claimant must be a Chinese enterprise with general VAT taxpayer status and export registration, and the required documents include the customs declaration for the exported goods.8

So when an agent exports in its own name rather than the factory's, the factory can lose the rebate on that shipment. Factories know this even when buyers do not. The result is either a refusal to quote EXW at all, or an EXW price that is quietly higher than the FOB price for identical goods — which is exactly the opposite of what a Western importer expects, and looks like an error until you know why.

5. FOB: why it is usually the right answer

FOB gets the division of labour right for a first container, and the argument is about control rather than price.

• Export clearance stays with the party who can perform it. The factory declares, the factory keeps its VAT rebate, and you never touch Chinese customs.
• You choose the carrier and you see the freight rate. On C- and D-terms the freight is inside a number the seller controls, and you have no way to tell whether you are paying market rate or market rate plus thirty per cent.
• You control the schedule. A seller booking freight optimises for their cost, not your delivery date. On a rolled sailing you find out when the goods do not arrive.
• You hold the relationship with the forwarder, which matters enormously when something goes wrong at destination and someone has to argue with a terminal.
• The valuation works cleanly. On FOB terms the place of direct shipment is the Chinese port, so the invoice price is close to the value for duty and there is nothing to unpick — see section 7.

The counter-argument is real and worth stating: FOB means you are now managing an ocean shipment, and if you have never done that, you will make mistakes that cost more than the margin a DDP seller would have taken. The answer is not to avoid FOB. It is to hire a freight forwarder, which costs a few hundred dollars and buys you someone whose job is exactly this.

The FOB fine print: origin local charges

"FOB Ningbo" says the seller delivers on board. It does not, by itself, settle who pays the origin terminal handling charge, the documentation fee, the seal fee and the port security charge — these are negotiable and vary by trade. Chinese quotes typically include them in FOB. But if your forwarder's destination invoice contains a line called "origin charges" for a shipment you bought FOB, someone has double-dipped, and it is worth the email.

6. DDP: the quote that looks cheapest and is not

Enforced by

CBSA and CRA, separately

Bites when

You try to claim the GST back, and when CBSA asks for records

What you lose

The input tax credit path, the bill of lading as leverage, and your import records

DDP — delivered duty paid — is the term that removes all the work. The seller books everything, clears Canadian customs, pays the duty and the GST, and puts the pallets on your dock. For a business with no import experience it is genuinely attractive, and for low-value samples it is fine.

For a container, it creates three problems, and the first two are financial.

Problem one: the seller becomes your importer of record

CBSA defines the importer of record as the person identified as the importer on the customs declaration when the goods are accounted for, identified by business number. That party is the primary contact for verifications and carries direct liability for post-accounting obligations.9 Under DDP, that is the seller.

A non-resident can be an importer of record — CBSA's definitions contemplate a person not resident in Canada authorised to account for goods. But since CARM became the system of record, importers must register their own business in the CARM Client Portal, with their own business number and an import-export program account; a customs broker cannot register a client's business on their behalf.10 And each importer must post its own financial security to hold release prior to payment privileges — the transition measure that let importers ride on a broker's security ended in April 2025.1112

Most Chinese sellers quoting DDP into Canada have not done any of this. What they have done is found a Canadian entity willing to act as importer for a fee, and that arrangement is exactly the one the regime was rebuilt to constrain.

Problem two: the GST becomes a real cost to somebody

This is the part that has actual dollars attached, and most explanations of it are wrong in one direction or the other. Here is the accurate version.

CRA's policy on imported goods turns on the de facto importer rather than the importer of record. Where a person other than the de facto importer imports goods and is the importer of record, it is only the de facto importer who may be considered to have imported the goods.13 Two consequences follow, and both matter:

1. The Chinese seller cannot claim the credit. They are the importer of record but not the de facto importer. The 5% GST they paid at the border is a dead cost, and it is inside the DDP price you were quoted.
2. You can claim it — but only with the paperwork. CRA is explicit that the de facto importer will need to obtain a copy of the import documentation from the importer of record in order to satisfy the documentary requirements for the credit.13
3. Which means the whole thing turns on a document you have to ask for. A supplier in another jurisdiction, who has already been paid, has no incentive to produce a customs accounting document for you. If you cannot get it, the 5% is simply gone.

On a $60,000 shipment that is roughly $3,000 of recoverable tax that quietly becomes a cost. Put it on the comparison sheet before you decide DDP is cheaper.

Problem three: you have no records, and you still owe them

Canadian importers must keep records relating to the origin, purchase, importation, cost and value of commercial goods for six years. Under DDP you never receive the commercial invoice, the accounting document or the valuation working. If CBSA later verifies the importation — or if a marketplace asks you to trace the goods to the manufacturer — you have nothing.

7. Canada values to the place of direct shipment

The rule

Costs to the place of direct shipment are added; costs from it are deducted

The effect

Ocean freight from China is outside the dutiable value

What to do about it

On C- and D-terms, insist the invoice itemises the freight

Most importers assume duty is charged on the landed cost. In Canada it is not, and the difference is worth real money on a container.

CBSA's valuation rules build the value for duty to the place of direct shipment — the place from which the goods begin their direct and uninterrupted journey to Canada. Transport and associated costs, and insurance costs, to that place are added to the price paid or payable. Costs from that place to Canada are deducted.1516 CBSA states it plainly: transportation costs from the place of direct shipment to Canada are not included in a calculation of value for duty.16

On FOB Shanghai terms the place of direct shipment is the Chinese port. So the ocean freight — which in the current market can be eight to eleven thousand Canadian dollars on a single forty-foot container — sits outside the dutiable value entirely. At a 6.5% duty rate that is roughly $650 of duty you do not pay.

Here is where it bites. On CIF, DAP or DDP terms the seller's invoice is frequently a single all-in number with no freight breakout. If the broker cannot identify the deductible transport cost, the whole number goes into the value for duty, and you pay duty on the freight. The fix costs one email: require that every commercial invoice on a C- or D-term shows the goods value and the transport cost as separate lines.

Then the arithmetic on the duty side. CBSA charges the 5% GST on the duty-paid value — the value for duty plus any customs duty — rather than on the goods value alone.21 And for a commercial import into Ontario, only the federal 5% is collected at the border; the provincial portion is handled through your own GST/HST return, where a registrant generally recovers the import GST as an input tax credit.14 Import GST, for a registered business, is a cash-flow cost rather than a true cost — which is precisely what DDP takes away from you.

8. There is no Canadian ISF. Stop paying for one

American importers file an Importer Security Filing — ISF, or "10+2" — 24 hours before loading, and the penalties for getting it wrong are famous. Forwarders trained on US traffic sometimes carry the habit, and the line item, onto Canadian shipments.

Canada's advance data regime is different in a way that matters to your invoice. Under CBSA's marine pre-load and pre-arrival requirements, the carrier transmits the primary cargo data 24 hours before loading at the foreign port for containerised cargo, and the freight forwarder transmits the supplementary house bill data.1819

There is no importer-filed Canadian equivalent. The obligation sits on the carrier and the forwarder, not on you. If a quote for a Canada-bound shipment contains an ISF filing fee, ask what statute it is filed under. The honest answer is that it is the forwarder's own administrative charge, which is a perfectly legitimate thing to bill for and a misleading thing to name after a foreign regulation.

One genuine Canadian requirement in the same territory: if you use a customs broker, CBSA requires written authority to act as your agent, and does not accept an electronic check-off box as a substitute for a signature — and you must also grant the broker access in the CARM Client Portal.20 Two separate steps, and new importers routinely do one and not the other, then wonder why release is held.

9. Nobody has to insure the ocean leg

Of the eleven rules, exactly two oblige anyone to buy cargo insurance: CIF and CIP. Under the other nine, the party bearing the risk simply bears it, uninsured, unless they buy their own cover.

Read that against section 2 and the exposure is obvious. Under FOB and CFR, risk passes to you the moment the goods are on board in China — and under neither rule is anyone required to insure it. A first container on FOB terms with no marine cargo policy is a five-figure asset crossing the Pacific uninsured.

Marine cargo cover is not expensive; on general merchandise it typically runs a fraction of a per cent of the insured value. Buy it in your own name, for the whole voyage including the inland leg to Ontario, and read what it excludes. Where the seller insures under CIF, the cover is at the minimum tier, which is a named-perils basis rather than all-risks — find out whether it would actually respond to the loss you are worried about.

10. 30/70, the bill of lading, and the telex release

Incoterms do not set payment terms. But the two interlock, because the bill of lading is simultaneously a transport document, a document of title, and the seller's leverage.

The structure you will be offered from China is usually 30% deposit on order, 70% balance — either before shipment, or against a copy of the bill of lading. The second version is materially better for you: the factory has to actually ship and produce a bill of lading before the balance falls due. Treat "70% before shipment" as a request to finance the factory's production run with no security, and negotiate.

Three release mechanisms, and the difference is not cosmetic:24

Original bill of lading

A physical document of title. Must be presented at destination to collect the cargo. The seller keeps it until paid, couriers it to you, and you present it.

Telex release

An original bill of lading was issued and has been surrendered at origin. The line messages destination to release without the paper. Used when the document will not arrive before your free days expire.

Express release or seaway bill

No original bill of lading exists at all. Release is automatic on arrival. Fast, and it removes the security entirely.

The rule that follows: never authorise a telex or express release before the balance is settled. The moment the original is surrendered, the seller's leverage is gone — and so is yours, because leverage in a shipping transaction is symmetrical and runs through the same document.

Which closes the loop back to DDP. Under DDP the seller is consignee and importer, there is no bill of lading in your hands at any point, and your only remedy for late, short or damaged goods is commercial pressure on a supplier in another jurisdiction. That is worth more than the administrative convenience.

11. Every line that is not in the FOB price

Budget these before you compare an FOB quote against a DDP one, because the DDP quote contains all of them plus a margin.

Demurrage and detention deserve the emphasis, because they are the line that turns a profitable container into a loss and they are entirely avoidable. Maersk's own definitions are the clean ones: demurrage is the time the filled containers spend inside the terminal, measured from offloading until they are gated out; detention is the time the containers spend outside the terminal, measured from pickup until the empty is returned.22

For an Ontario importer the exposure is structurally worse than for a buyer at the port. The container discharges in Vancouver or Prince Rupert, moves inland by rail, lands at a Toronto-area ramp, and gets drayed to you — and the free time is consumed by the journey before your warehouse has seen it. Clear customs before arrival, book the drayage before the vessel berths, and have a plan for unloading the same day it lands.

The full cost stack, with current rate levels and a worked landed-cost example for a container into Ontario, is in our guide to shipping costs and timelines.

The checklist

Common questions

Sources

Every figure and rule above comes from one of these. Where this article draws a conclusion the source does not state literally, it says so in the text.

1. International Chamber of Commerce — the Incoterms® rules
2. ICC — Incoterms® 2020 (what changed from 2010)
3. ICC — news release: ICC releases Incoterms® 2020
4. ICC — 2026 Global Policy Commissions Workplan (groundwork for Incoterms® 2030)
5. ICC Academy — Incoterms® 2020: CIP or CIF (insurance levels)
6. US Department of Commerce — know your Incoterms
7. Customs Law of the People's Republic of China (English text, Articles 9–11)
8. China's VAT export refund system — overview of the rules
9. CBSA — Memorandum D17-2-5: duty liability of the importer of record
10. CBSA — start your CARM registration: your own business number and RM account
11. CBSA — reminder: the financial security transition measure ended in April 2025
12. CBSA — Memorandum D17-5-2: financial security for release prior to payment
13. CRA — GST/HST Policy Statement P-125: input tax credit entitlement for tax on imported goods
14. CRA — input tax credits
15. CBSA — Customs Valuation Handbook
16. CBSA — Memorandum D13-3-3: transportation and associated costs
17. CBSA — Memorandum D13-4-7: adjustments to the price paid or payable
18. CBSA — Memorandum D3-5-1: marine pre-load and pre-arrival reporting requirements
19. CBSA — eManifest requirements by client type
20. CBSA — Memorandum D1-6-1: authority to act as an agent
21. CBSA — guide to importing commercial goods: duties and taxes
22. Maersk — what are demurrage and detention
23. Trade Finance Global — CIF: cost, insurance and freight
24. Trade Finance Global — telex release

Last reviewed September 25, 2026. Rules and rates change. If you find something here that has gone out of date, tell us and we will fix it.