Incoterms and Payment Terms for Cosmetic Packaging Imports: A Buyer's Guide

Incoterms are the international rules that define who is responsible for transport, insurance, customs clearance and risk at each step of an import. The most common terms for cosmetic packaging are FOB, CIF and DDP, with EXW and FCA used for smaller or specialised shipments. Combined with a payment term such as TT, LC or OA, they control both cost and cash exposure.

The unit price on a supplier's quotation is only one part of the landed cost of imported packaging. Freight, insurance, customs duty, brokerage fees, last-mile delivery, currency conversion and the cost of holding inventory all add to the final cost. Incoterms define who pays for which of those steps and where risk passes from seller to buyer. Payment terms define when money moves. Together they determine whether a $0.20 bottle lands at $0.32 or $0.40 on the brand's loading dock. This guide walks through the most common Incoterms for cosmetic packaging, the payment terms that work with them, and how to put the right combination on every PO.

What Are Incoterms?

Incoterms are a set of pre-defined international commercial terms published by the International Chamber of Commerce. They define who is responsible for transport, insurance, customs clearance, duties, and the point at which risk passes from the seller to the buyer. Incoterms do not cover the price of the goods or the payment mechanism; those are separate contract terms.

The current edition is Incoterms 2020, in force since 1 January 2020. There are 11 terms split across two transport groups. Any-mode terms apply to all transport modes: EXW, FCA, CPT, CIP, DAP, DPU and DDP. Sea and inland waterway terms apply only to those modes: FAS, FOB, CFR and CIF. The choice depends on whether the shipment is by sea, air, courier or multimodal.

The most common Incoterms for cosmetic packaging imports from China are FOB for buyers who want to arrange their own freight, CIF for buyers who want the seller to handle sea freight and insurance, and DDP for buyers who want a fully landed price. EXW and FCA are used for smaller or direct-from-factory orders. Our air versus sea freight guide explains which mode is right for which order size.

What Does FOB Cover?

FOB, Free On Board, means the seller delivers the goods on board the vessel at the named port of shipment. The seller handles export clearance and the cost of loading the goods onto the ship. The buyer takes responsibility for the main carriage, insurance, import clearance and last-mile delivery.

FOB is the standard term for buyers who have a freight forwarder, who negotiate their own ocean rates, and who want visibility on the freight cost. It gives the buyer the most control over routing, transit time and insurance. It also means the buyer has to be set up to handle import customs in the destination country.

FOB is also the most common Incoterm used for cosmetic packaging quotation. Quotations are typically issued FOB Shenzhen, Ningbo, Shanghai or Qingdao, with freight quoted separately by the buyer's forwarder. Risk transfers when the goods cross the ship's rail at the port of loading.

What Does CIF Add?

CIF, Cost Insurance and Freight, means the seller pays for the goods, the main carriage to the named port of destination, and the insurance for that carriage. The buyer takes responsibility for import clearance, duties, last-mile delivery and any additional inland transport.

CIF is convenient for buyers who do not have a forwarder or who want a single price that includes freight. It is also the term most often used in the first quote from a Chinese supplier, because it gives the buyer a delivered-to-port price to compare.

CIF has two caveats. First, the seller is only required to buy minimum insurance cover, so buyers who want full cover should specify additional insurance in the contract. Second, risk still transfers at the port of loading, not at the port of destination, so any damage in transit is the buyer's claim against the insurer, not the seller's.

What Does DDP Mean for the Brand?

DDP, Delivered Duty Paid, means the seller delivers the goods, cleared for import, to the named place in the destination country. The seller pays for transport, insurance, customs duty and import clearance. The buyer takes responsibility only for unloading and any further handling.

DDP is the most convenient term for the buyer and is increasingly common for e-commerce shipments and for buyers in markets where the seller has a local entity or partner. It also concentrates risk on the seller, who has to manage customs in a country they may not know well.

DDP has trade-offs. The seller adds margin to cover their customs risk, which can make DDP more expensive than the equivalent FOB plus own forwarder. DDP also requires the seller to be VAT-registered in some markets and to handle import licences and certifications. For cosmetic packaging, the seller may need access to the brand's regulatory files.

When Should Buyers Use EXW?

EXW, Ex Works, places maximum obligation on the buyer. The buyer picks up the goods at the supplier's factory, pays for transport, export clearance, insurance, import clearance and last-mile delivery. The seller just makes them available at the loading dock.

EXW is used for small lots, for buyers with a Chinese consolidation warehouse, or for buyers who want absolute control of every step. It is rarely used for full-container shipments of cosmetic packaging because the export clearance burden on the buyer is heavy.

FCA, Free Carrier, is a more practical alternative for small lots. The seller delivers the goods, cleared for export, to the carrier nominated by the buyer. The buyer takes responsibility from there. FCA is the right term when the buyer is arranging a courier pickup or an air freight handover.

How Do Payment Terms Work?

The payment term is independent of the Incoterm but interacts with it. Common payment terms are TT (Telegraphic Transfer), LC (Letter of Credit), OA (Open Account) and DP (Documents against Payment). For cosmetic packaging from China, TT and LC dominate.

TT is a wire transfer from the buyer to the seller. It is split into a deposit (typically 30%) paid on order confirmation, with the balance (typically 70%) paid against a copy of the shipping documents. TT 30/70 is the standard first-order structure, with TT 50/50 and TT 100% in advance used depending on the buyer's credit history and the supplier's risk appetite.

LC is a bank-issued guarantee that the seller will be paid when the shipping documents match the terms. LC is more secure for the seller but more expensive for the buyer. It is used for very large orders, for first orders with an unknown supplier, or where the bank financing the buyer requires it. OA is used for trusted long-term suppliers; the buyer pays 30, 60 or 90 days after shipment, with the seller carrying the receivables risk, often insured.

How Do You Calculate Landed Cost?

Landed cost is the total cost of the imported goods delivered to the buyer's warehouse. For cosmetic packaging shipping by sea from China to the US or EU under FOB, the calculation is typically: FOB unit price plus ocean freight per unit plus insurance plus customs duty plus customs brokerage plus last-mile delivery plus any finance or holding costs.

Customs duty depends on the HS code and the destination country. Most plastic cosmetic bottles enter the US at 6.5% duty (HTSUS Chapter 39) and the EU at 6.5% (CN code Chapter 39), though rates vary by specific resin and product. Brokers typically charge USD 100-200 per entry for clearance. Our HS code and duty guide explains how to classify and estimate duty for cosmetic bottles.

For a 30ml PET bottle shipped FOB Shenzhen at USD 0.18, the typical landed cost to a US distribution centre is roughly USD 0.22 to USD 0.26 per bottle, including freight, duty, brokerage and last-mile delivery. The same bottle shipped DDP is usually quoted at USD 0.26 to USD 0.30, with the supplier carrying the freight and duty margin.

Which Incoterm and Payment Term Should You Choose?

The right combination depends on order size, frequency, freight control and risk tolerance. For first orders under USD 10,000, FCA Shenzhen with TT 30/70 is a typical starting point. For ongoing orders of USD 50,000 or more, FOB Shenzhen or CIF nearest port with TT 30/70 or OA 60 days is typical. For very large orders or first orders with a new supplier, LC at sight is the standard.

Consider three questions. Do you want control over routing and freight cost (FOB), or do you want a single delivered price (CIF or DDP)? Do you have the cash flow to fund a 30% deposit, or do you need OA terms? Is your forwarder set up to clear customs in the destination country, or do you want the supplier to handle it?

At ShiJin we quote FOB Shenzhen, Ningbo, Shanghai or Qingdao as standard, and we can support CIF, FCA and EXW terms. We accept TT 30/70 and LC at sight for new customers, and OA terms for established partners. Send us your target SKU list, your destination market and your preferred terms, and we will return a quotation that includes freight estimate and lead time, with MOQ from 5,000 units and 15-25 day production lead times.

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