The Complete Guide to Air Freight vs Sea Freight from China

Factory audits should cover five dimensions: (1) quality management system — do they have documented procedures and follow them? (2) production capability — can their equipment achieve your tolerances? (3) social compliance — are working conditions acceptable? (4) financial health — are they stable enough to complete your order? (5) export experience — have they shipped similar products to your market? A one-day audit can assess all five with a proper checklist.

Incoterms 2026 clarified several points that often caused confusion. Under FOB, the seller's responsibility ends when goods are loaded on the vessel. Under CIF, the seller arranges and pays for freight and insurance but risk transfers at the port of origin. DDP means the seller bears all costs and risks until delivery. Choose based on your logistics capability, not habit. CIF seems easier but you lose control of shipping decisions.

Payment terms follow a standard progression in China. Transaction 1: 30% deposit, 70% before shipment. Transaction 2-3: 30% deposit, 70% against B/L copy. After 1 year: possible 30% deposit, 70% 30 days after B/L date. L/C at sight is standard for large transactions. Never jump ahead in this progression — let the track record justify each step. Trust is earned through consistent performance.

Tariff classification (HS code) determines your duty rate. Different suppliers may classify the same product under different HS codes. Always verify the correct HS code and check if your product qualifies for preferential duty rates under trade agreements. An incorrect classification can result in overpayment or customs penalties. Request the supplier's export HS code and compare it with your import country's classification.