Incoterms are the three-letter codes on your purchase contract that decide one thing above all: at what point cost and risk move from your supplier to you. Pick the wrong one and you can end up paying for freight twice, or owning the risk for cargo you can't see. Here are the terms that matter for containerized imports.
The terms you'll actually see
Term
Supplier covers
Risk passes to you
EXW
Nothing — goods at their factory door
At the factory
FCA
Export clearance + delivery to your carrier
When handed to carrier
FOB
Everything until goods are on the vessel
On board at origin port
CFR / CIF
Ocean freight (CIF adds insurance)
Still on board at origin — not at destination!
DAP
Transport to your named place
On arrival, before unloading
DDP
Everything incl. Canadian duties
Delivered, duty paid
Why FOB is the default advice for China imports
Under FOB your supplier handles the part they're good at — Chinese trucking, export clearance, port handling — and you control the ocean freight, the carrier choice, and every cost after the ship sails. You see one freight invoice, from your own forwarder, in your own currency.
The traps
CIF "cheap freight". The seller buys the cheapest ocean slot and recovers margin through destination charges you only discover at the port. The headline price is low; the landed cost isn't.
EXW from China. You become responsible for Chinese export formalities you can't perform — in practice your forwarder's China agent does it, but quoting and liability get murky. FCA usually achieves what buyers wanted from EXW, cleaner.
DDP "convenience". The seller must act as the importer into Canada — but non-resident importation has real compliance requirements, and you may lose the GST input tax credit on tax your seller paid. Many DDP arrangements quietly become your problem at an audit.
Risk vs cost confusion. Under CFR/CIF the seller pays the freight but risk passes at the origin port. If the cargo is damaged mid-ocean, it's your insurance claim — under CFR you may have no insurance at all unless you bought it.
One more thing Incoterms don't do: they don't decide who owns the goods or when you pay — that's your sales contract. They only allocate transport cost, risk, and clearance duties.
Educational overview based on Incoterms 2020. Review your specific contracts with your advisor, or ask our team how a term plays out on your lane.
FAQ
Frequently asked questions
Who pays the duties under DDP into Canada?▼
Under DDP the seller is responsible for Canadian import clearance, duties, and taxes — which means a foreign supplier must act as a non-resident importer, with real CBSA obligations (Business Number, CARM registration, security). Buyers often discover the catch later: the GST the seller paid may not be recoverable by anyone, and if the seller cut corners, questions can land on you at audit. Treat DDP offers from overseas suppliers with caution.
Which Incoterm is best for importing from China to Canada?▼
For containerized freight, FOB is the usual recommendation: the supplier handles Chinese trucking, export clearance, and loading, while you control the ocean carrier and every cost after departure. FCA is the cleaner choice when goods hand over somewhere other than the port. The terms to interrogate hardest are CIF (hidden destination charges) and DDP (the seller becomes the importer into Canada).
Does CIF include customs clearance and delivery in Canada?▼
No. CIF ends the seller's cost obligation at the destination port and includes only minimum-level cargo insurance — Canadian customs clearance, duties, GST, terminal charges, and delivery to your door are all yours. And the risk transferred to you back when the goods were loaded at the origin port, not on arrival. CIF quotes look complete; they aren't.
Do Incoterms decide who is the importer of record in Canada?▼
Not directly — Incoterms allocate transport cost, risk, and clearance responsibility between buyer and seller, but importer of record is a customs matter under Canadian law. In practice only DDP implies the seller imports; under every other common term the buyer is set up as the importer with CBSA. Your sales contract, not the three-letter code, governs ownership and payment too.
Do I need my own cargo insurance when buying FOB?▼
Yes, if you want to be covered — under FOB the risk is yours from loading at the origin port, and nothing in the term obliges anyone to insure the ocean leg. Under CFR the same is true; only CIF makes the seller buy insurance, and typically only at minimum cover. Annual open-cargo policies are usually inexpensive relative to a single total-loss event; a forwarder can typically arrange per-shipment cover if you don't carry a policy.
Rather Just Hand It Off?
This is the work we do every day. Get a quote and let our licensed team handle the details.