Incoterms for NZ Importers: EXW, FOB, CIF and DDP in Plain English

"FOB Shenzhen, USD 4.20." If you can't read that line, you can't compare supplier quotes — and you might be about to pay for the same freight twice. Incoterms are the three-letter codes that decide who pays for which leg of the journey, who organises it, and where responsibility passes from supplier to you. There are eleven of them in the official ICC framework; as an NZ importer you'll live inside four.

EXW — Ex Works: "come and get it"

Under EXW, the price covers the goods sitting at the factory door. Everything else — trucking to port, Chinese export clearance, ocean freight, NZ clearance, delivery — is your problem and your cost.

EXW quotes look temptingly cheap because they contain the least. They also hand you the messiest job in the chain: arranging pickup and export formalities inside China. Some forwarders handle it well, but for a new importer, EXW usually means more hassle for marginal savings. If a supplier only quotes EXW, ask for FOB as well and compare properly.

FOB — Free On Board: the default, for good reason

FOB is the standard Chinese export quote and the term we recommend for most NZ importers. The supplier covers everything to the nearest Chinese port — inland transport, export clearance, loading — and the moment the goods are on board the vessel, cost and risk pass to you. From there, your freight forwarder runs the ocean leg to Auckland or Tauranga and your customs broker clears entry.

Why it's the sweet spot: the supplier handles the China-side steps he's genuinely better placed to do, while you control the expensive legs — choosing the forwarder, the ocean rate, the insurance. Control of freight is control of cost. Always get a benchmark quote from the factory's own forwarder too; sometimes it wins, and it keeps your forwarder honest.

CIF — Cost, Insurance and Freight: convenient, but read the fine print

Under CIF, the supplier's price includes ocean freight and insurance to your named NZ port. Sounds like less work — and sometimes for a first shipment it is. But there are three catches:

• Risk still transfers at the Chinese port, not in NZ. If the goods are damaged mid-ocean, you're claiming on an insurance policy the supplier chose, usually at minimum cover.
• The freight isn't free — it's baked into the price, at a rate you can't see or negotiate, often with a margin added.
• Destination charges can sting. Some CIF arrangements arrive with unexpectedly high NZ-side handling fees from the supplier's chosen agent — a well-known way for cheap CIF quotes to claw money back.

CIF isn't wrong; it's just opaque. If you use it, get the destination charges in writing first.

DDP — Delivered Duty Paid: "door to door, everything included"

DDP means the supplier delivers to your NZ address with duty and taxes paid. Maximum convenience, minimum control — and for a real import business, two problems. First, you're trusting the supplier's agent to do your NZ customs entry properly, and errors land on the goods you're waiting for. Second, GST: if the supplier's agent pays the import GST in their own name rather than yours, claiming that 15% back as an input credit can get messy. If you're GST-registered (compulsory at NZ$60,000 turnover), you generally want import entries made under your own Customs client code so the GST paperwork cleanly supports your claim. Talk to your broker or accountant before agreeing to DDP on commercial quantities.

What this means for your landed cost sheet

Two practical notes for the spreadsheet:

• Quotes are only comparable at the same Incoterm. A US$4.20 FOB quote can be better than a US$4.60 CIF quote or worse — you can't tell until you add the missing legs. Convert everything to a full landed cost per unit.
• NZ GST is calculated on the CIF-equivalent value — goods plus shipping plus insurance plus any duty — regardless of which Incoterm you bought on. Buying FOB doesn't shrink the GST base; Customs adds the freight and insurance in.

Discuss delivery terms with the supplier before you order, put the agreed Incoterm on your purchase order and pro-forma invoice, and choose it with your forwarder based on your budget and experience. When in doubt: FOB, your own forwarder, your own insurance.

Key takeaways

• Incoterms define who pays for what and where risk transfers — quotes on different terms can't be compared directly.
• FOB is the NZ importer's default: supplier handles the China side, you control freight, insurance and cost.
• CIF hides the freight rate and can carry nasty destination charges; DDP can complicate your import GST claim.
• Whatever the term, NZ GST is charged on goods + shipping + insurance + duty.

Related: Sea, Air or Courier? Choosing the Right Freight to NZ in 2026, Freight Forwarders and Customs Brokers: Who Does What in NZ

Figure: How far each Incoterm carries your goods — everything to the right of the bar is yours to arrange.