FOB vs EXW vs DDP: Which Shipping Terms Should You Buy On?

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Two factories quote you the same water bottle. One says $3.10. The other says $3.60.

Easy choice? Not yet. Look at the three letters next to each price. If the first quote is EXW and the second is FOB, the "cheap" one might end up costing you more.

Those three letters are called Incoterms. They decide two things:

• Who pays for each part of the trip
• When the risk moves from the seller to you (if something gets damaged, whose problem is it?)

Here are the three you'll see most often, in plain English.

EXW (Ex Works): "Come and get it"

The factory makes your goods and leaves them at its door. That's where their job ends.

You pay for:

• Loading the truck at the factory
• Trucking to the port
• Export customs in the supplier's country
• Ocean or air freight
• Import duty, customs clearance and delivery at home

Risk moves to you: the moment the goods are ready at the factory.

Good for: experienced buyers with a freight forwarder who also handles export in the supplier's country.

Watch out: EXW quotes always look the lowest, because so much is left out. Export paperwork can be hard to sort out from abroad, and some forwarders charge extra for it.

FOB (Free On Board): "We'll get it on the ship"

The factory trucks your goods to the port, clears export customs and loads them onto the ship. The port is always named, for example FOB Shenzhen or FOB Ningbo.

You pay for:

• Ocean freight from that port
• Insurance (recommended)
• Import duty, clearance and delivery at home

Risk moves to you: once the goods are on board the ship.

Good for: most small and growing brands shipping by sea. It's the most common term for factory quotes from Asia.

Why we like it: you choose your own forwarder, so you can compare freight prices and see exactly what you pay for each step.

Small note: officially, FOB is meant for sea freight. For air or courier shipments, factories often quote FCA instead (the factory hands the goods to your carrier). The idea is similar.

DDP (Delivered Duty Paid): "We'll bring it to your door"

The seller delivers to your address with import duty and taxes paid.

You pay for: the price on the quote, at least in theory.

Risk moves to you: when the goods arrive at your door.

Good for: first orders, small shipments and anyone who wants it simple.

Watch out:

• Freight and duty are built into the price, so you can't see each part
• Check who is named as the importer. In some cases you are still responsible for the import, even on DDP
• Ask what happens if customs holds the goods, and who pays for storage
• Duty rates and rules change. Ask whether the price is fixed or can change before delivery

Quick comparison

	EXW	FOB	DDP
Factory loads the truck	No	Yes	Yes
Export customs	You	Factory	Seller
Ocean / air freight	You	You	Seller
Import duty	You	You	Seller
Risk moves to you	At the factory	On the ship	At your door
Your control	High	High	Low
Your work	Most	Medium	Least

A simple example

Same bottle, 3,000 units, two quotes (made-up numbers to show the idea):

	Quote A (EXW)	Quote B (FOB)
Price per unit	$3.10	$3.60
Pick-up, trucking, export papers	You add this	Included
Ocean freight	You add this	You add this
Duty	You add this	You add this

Quote A only wins if the trucking and export costs come to less than $0.50 per unit. For a small order, they often don't. The only fair way to know is to add everything up.

How to compare quotes fairly

1. Ask every factory to quote on the same terms. FOB is usually easiest.
2. Get a freight quote from your forwarder for the same port.
3. Add import duty for your product's tariff code.
4. Add the rest: packaging, inspection, bank fees, delivery from the port.
5. Compare the landed cost per unit. Not the factory price.

Our simple rule

• First small order, want it easy: DDP is fine, but ask for a breakdown of what's included.
• Regular orders by sea: FOB with your own forwarder.
• EXW: only if your forwarder handles export in the supplier's country too.

The bottom line

The price on a quote is only half the story. The three letters next to it tell you the other half. Always compare quotes on the same terms, and always compare the landed cost.

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