Tips from a Chinese lawyer about incoterms

New buyers often confuse incoterms w payment terms. I hope you don’t make the same mistake. Let me explain.

The Incoterms rules or International Commercial terms are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) widely used in international trade to clarify when the transfer of ownership takes place。In other words, Incoterms are used in a sales agreement and define the responsibilities and obligations of both parties and help traders in different countries to understand one another. Incoterms make international trade easier. Such as “FOB” = Free On Board, “CIF”= Cost, Insurance & Freight, to name a few.

Payment term means how and when to pay. For example, 30% deposit + 70% at ship date. While Incoterms may be clear (“FOB Shanghai” for example) in the quote, sometimes the suppliers may not state clearly in their quotation to you about payment terms. You may be in for a rude awakening if you are thinking you can pay your supplier 100% once the goods are on the boat in Shanghai (FOB) but your suppliers wants 50% deposit to even start the order.

To make a long story short, make sure your quotes and PO’s state clearly both the Incoterms and the payment terms.

Written for CSIC by Sophie Mao

China based lawyer at



  1. China Checkup on December 11, 2013 at 11:19 am

    Another issue that’s often overlooked by importers is that it’s up to the importer and not the supplier to insure that import conditions are passed for certain categories of goods. Buyers shouldn’t expect the manufacturer in China to be aware of the particular documentation required to import certain goods into certain areas (e.g. import of toys into the EU is heavily regulated); the buyer must ensure that these standards are met and that documentation is acquired before shipping.

  2. […] depends on the incoterms of your order. For example, if you are buying DDP, then the seller will organize the logistics. If […]

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