Key takeaways
- Under FOB, CFR and CIF, risk passes to the buyer when the goods are on board the vessel at the port of shipment, even when the seller pays the freight.
- CIF only obliges the seller to buy minimum Institute Cargo Clauses (C) cover at 110% of contract value, which does not cover typical glass breakage; buyers of glazed units should require ICC (A).
- FOB is usually the best default for buyers with their own forwarder; CIF or CFR suits buyers without one; DDP suits small buyers only if the seller can legally act as importer of record.
- Under DDP the seller pays import duties and taxes, so any anti-dumping duty, misclassification or unrecoverable VAT becomes a dispute between buyer and seller.
- When paying by letter of credit, the Incoterm must match the documents: CIF needs a freight-prepaid bill of lading and an insurance document; FOB needs a freight-collect bill of lading.
For a container of windows and doors, the Incoterm decides three things: who pays each leg of the journey, where risk of loss or damage passes from seller to buyer, and who must buy insurance. Most window imports from China use FOB (buyer books the ship) or CIF (seller books the ship and minimum insurance), and in both cases risk passes when the crates are on board in China — not when they reach your site.
Incoterms 2020 are published by the International Chamber of Commerce (ICC) and only apply if your contract names them, for example “FOB Shenzhen, Incoterms 2020”. They do not cover payment, title, product quality or customs classification; those belong in the sales contract.
The seven rules buyers actually use, compared
| Rule | Seller delivers / risk passes | Main freight paid by | Insurance duty | Import duties and VAT | Fit for windows |
|---|---|---|---|---|---|
| EXW Ex Works | At seller's premises, not loaded | Buyer | None | Buyer | Poor: buyer must handle Chinese export clearance |
| FCA Free Carrier | Handed to buyer's carrier at named place | Buyer | None | Buyer | Good, ICC-recommended for containers |
| FOB Free On Board | On board vessel at port of shipment | Buyer | None | Buyer | Good, the common default with own forwarder |
| CFR Cost and Freight | On board vessel at port of shipment | Seller | None | Buyer | Good if buyer insures separately |
| CIF Cost, Insurance and Freight | On board vessel at port of shipment | Seller | Seller, minimum ICC (C), 110% | Buyer | Good if upgraded to ICC (A) |
| DAP Delivered at Place | At named destination, ready for unloading | Seller | None (seller carries risk) | Buyer | Useful door delivery; buyer clears customs |
| DDP Delivered Duty Paid | At named destination, import-cleared | Seller | None (seller carries risk) | Seller | Convenient but legally and fiscally complex |
Why FOB and CIF dominate container shipments
Strictly, the ICC recommends FCA rather than FOB for containerised cargo, because the seller hands the container to the terminal days before it is loaded on the ship, yet under FOB still carries the risk until it is on board. In practice FOB and CIF remain standard in the window trade because banks, forwarders and customs brokers are used to them, and terminal damage to a sealed container is rare. ARCVIEW quotes FOB Foshan or Shenzhen, CIF to the destination port, or DDP door-to-door in markets such as Australia and the USA.
- Choose FOB if you have a forwarder with good rates and want control of the booking, the shipping line and the destination charges.
- Choose CIF or CFR if you import occasionally and want one price to your port. Expect the seller's forwarder to recover margin through destination handling charges.
- Choose FCA if you consolidate partial loads at a forwarder's warehouse in China or want risk to pass at the terminal gate.
- Avoid EXW for exports from China: the buyer becomes responsible for export clearance, which a foreign buyer cannot usually do in its own name.
Insurance: ICC (A) versus ICC (C)
Under CIF the seller must insure the goods for at least 110% of the contract value, but only on Institute Cargo Clauses (C), the most limited cover. ICC (C) responds to major casualties such as fire, explosion, the vessel sinking or stranding, collision and general average. It does not cover the losses windows typically suffer: breakage from handling, crushing, water ingress or theft. ICC (A) covers all risks of loss or damage, subject to exclusions such as insufficient packing, inherent vice and delay.
| Loss event | ICC (C) | ICC (A) |
|---|---|---|
| Vessel sinks, strands or catches fire | Covered | Covered |
| General average contribution | Covered | Covered |
| Container lost overboard | Generally covered (jettison / washing overboard wording varies) | Covered |
| Glass broken by rough handling or forklift damage | Not covered | Covered unless caused by insufficient packing |
| Rainwater or seawater ingress | Not covered | Covered |
| Theft of hardware or whole crates | Not covered | Covered |
| Damage due to inadequate crating | Not covered | Excluded |
| War and strikes | Excluded unless added | Excluded unless added |
The packing exclusion matters: insurers reject claims where crating was inadequate for the voyage. ISPM-15-compliant crates, protective film, corner guards and foam are therefore part of your insurance as well as your quality plan. ARCVIEW's transit damage claim rate in 2025 was 0.07%, and confirmed breakage is replaced in the next shipment, but that is a supplier commitment, not insurance.
DDP pitfalls
DDP looks simplest because the seller delivers to your door with duties and taxes paid. The risks sit in the details:
- Importer of record: the seller, or its agent, must be legally able to import in your country. Where that is not possible, the shipment is often entered in the buyer's name anyway, which is no longer true DDP.
- VAT and GST recovery: if the seller pays import VAT, a registered buyer may be unable to reclaim it, increasing real cost.
- Trade-remedy duties: if anti-dumping or countervailing duties are later assessed on aluminium content, liability may fall on the importer of record years after delivery. See our landed cost guide.
- Hidden mark-up: a single DDP price hides freight, duty and brokerage, making it hard to compare quotes.
DDP can work well for a homeowner or small contractor buying one container. For larger or repeat orders, FOB or CIF with your own licensed customs broker is usually more transparent and keeps compliance in your control.
How the Incoterm interacts with a letter of credit
A documentary letter of credit, normally governed by the ICC's UCP 600, pays against documents, not goods. The documents the bank demands must match the Incoterm. Under CIF, the L/C should call for a clean on-board bill of lading marked freight prepaid plus an insurance document for at least 110% of CIF value. Under FOB, the bill of lading is marked freight collect and no insurance document is required. Incoterms 2020 added an option under FCA for the buyer to instruct its carrier to issue an on-board bill of lading to the seller, which helps when an L/C requires one.
ARCVIEW accepts an L/C at sight for orders above USD 80,000; smaller orders use a 30% T/T deposit and 70% against a copy of the B/L. Whichever you use, add an independent inspection certificate to the required documents. For the full order sequence see our guide to importing windows from China, or request a quote on your preferred term.
Frequently asked questions
- Which Incoterm is best for importing windows from China?
- FOB is usually the best default if you have your own freight forwarder, because you control the booking, the shipping line and destination charges. CIF or CFR suit occasional buyers who want one price to their port, provided they upgrade insurance to ICC (A). FCA is technically better suited to containers. EXW is rarely practical because the buyer must handle Chinese export clearance.
- When does risk transfer under FOB and CIF?
- Under both FOB and CIF, risk of loss or damage passes from seller to buyer when the goods are placed on board the vessel at the port of shipment in China. Under CIF the seller pays the freight and buys insurance, but the buyer still carries the risk during the voyage and claims on the policy if crates arrive damaged.
- Does CIF insurance cover broken glass?
- Usually not. Incoterms 2020 only require the seller to buy minimum Institute Cargo Clauses (C) cover under CIF, which covers major casualties such as fire, sinking or collision but not breakage from handling. Buyers of glazed windows and doors should require ICC (A) all-risks cover in the contract, or buy CFR and arrange their own ICC (A) policy.
- What are the risks of buying windows DDP?
- Under DDP the seller acts as importer and pays duties and taxes. Risks include the seller not being legally able to act as importer of record, the buyer losing the ability to reclaim import VAT or GST, later anti-dumping or countervailing duty assessments, and freight and duty costs hidden in one price. Check who the importer of record will be before agreeing DDP.
- Do Incoterms affect a letter of credit?
- Yes. The L/C documents must reflect the Incoterm. A CIF contract needs a clean on-board bill of lading marked freight prepaid and an insurance document for at least 110% of value; an FOB contract needs a freight-collect bill of lading and no insurance document. Mismatches between the L/C, the contract and the shipping documents are a common cause of payment delays.
Sources & standards
- 01Incoterms® 2020 rules — International Chamber of Commerce
- 02ISPM 15: Regulation of wood packaging material in international trade — International Plant Protection Convention
- 03Know your Incoterms and export basics — International Trade Administration, U.S. Department of Commerce
- 04Customs procedures and international trade facilitation — World Customs Organization
