When you receive a price quote from a Vietnamese supplier, it will almost always be followed by three letters: FOB, CIF, or EXW. These are Incoterms®, and they are critically important. They define the exact point in the shipping process where the responsibility (and cost) for the goods transfers from the supplier to you, the buyer.
Choosing the wrong Incoterm can lead to hidden costs and a loss of control over your shipment. Let’s break down the three most common options for SMEs.
EXW (Ex Works)
- What it means: The price quoted is for the product sitting at the factory’s door.
- Supplier’s Responsibility: Minimal. They just need to make the goods available for pickup.
- Your Responsibility: Everything else. You are responsible for arranging and paying for a truck to pick up the goods, handling all export documentation in Vietnam, the ocean freight, insurance, and customs clearance in your home country.
- Verdict: While it can seem like the cheapest price, it gives you the most work and responsibility. It’s generally not recommended for beginners.
FOB (Free On Board)
- What it means: The price quoted includes getting the product from the factory to the designated port in Vietnam (e.g., “FOB Cat Lai Port, HCMC”) and loaded onto the shipping vessel.
- Supplier’s Responsibility: All local costs: trucking to the port, clearing Vietnamese customs for export.
- Your Responsibility: The moment the goods are on the ship, you take over. You are responsible for the ocean freight, insurance, and import customs clearance.
- Verdict: This is the most common and highly recommended Incoterm for SMEs. It offers an excellent balance of cost and control. The supplier handles the local complexities they are experts in, while you control the main, most expensive part of the journey (the international freight), allowing you to shop around for the best rates from your own freight forwarder.
CIF (Cost, Insurance, and Freight)
- What it means: The price quoted includes the cost of the product, the insurance, and the shipping all the way to your destination port.
- Supplier’s Responsibility: Almost everything. They manage and pay for the entire shipping process to your country’s port.
- Your Responsibility: You take over once the ship arrives at your port, handling import customs and trucking to your warehouse.
- Verdict: This seems like the easiest option, but it often comes with hidden risks. The supplier will choose the cheapest freight and insurance options, not the best or fastest. You have almost no control over the shipment once it leaves Vietnam, and there can be unexpected fees at the destination port. It is generally not recommended unless you have a very high level of trust in your supplier.
Navigating logistics and choosing the right partners can be complex. A sourcing agent often has established relationships with reliable freight forwarders, helping you get competitive quotes and ensuring a smooth process, especially when using the recommended FOB term.
Choose Control with FOB
For the vast majority of SMEs sourcing from Vietnam, FOB offers the best blend of price, control, and convenience. It lets each party handle the part of the process they know best. By choosing FOB and working with your own trusted freight forwarder, you gain control over your costs and visibility over your entire supply chain.
Have questions about logistics and shipping from Vietnam? The EQSource team can help you understand your options and connect you with trusted freight forwarding partners. Contact us for a logistics consultation.
