How to Choose Between OEM and ODM Manufacturing in China

Total landed cost is the only number that matters when comparing Chinese suppliers. It includes: factory price, inland freight to port, export customs fees, ocean/air freight, insurance, import duties, VAT, customs brokerage, and inland freight from destination port. A $10 product FOB can easily become $14-16 landed. Most first-time importers forget at least three cost components and end up with negative margins.

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.

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.