EXW vs FOB vs DDP: Which Incoterm Should You Use When Buying from China?

When you’re negotiating with a Chinese supplier, you’ll quickly encounter terms like FOB, EXW, CIF, and DDP. These are Incoterms — internationally standardized trade terms that define exactly who is responsible for what costs and risks during shipment.

Choosing the wrong Incoterm can cost you significantly or leave you exposed to risks you didn’t plan for. This guide explains each term clearly and tells you which to use based on your situation.

Why Incoterms Matter

Incoterms define two things:

Who pays for each stage of transportation
Where the risk transfers from seller to buyer (i.e., who is responsible if something is lost or damaged)

If you don’t specify an Incoterm, or if you misunderstand what the one you agreed to actually means, you can end up:

Paying twice for freight you thought was included
Being responsible for damage you thought was the supplier’s problem
Paying unexpected customs fees at your end

The Four Terms You’ll Encounter Most

EXW — Ex Works

What it means: The seller makes goods available at their premises (factory or warehouse). The buyer is responsible for absolutely everything from that point — picking up the goods, export clearance, freight, insurance, import clearance, and final delivery.

Risk transfers: At the factory gate.

Cost responsibility (buyer): Everything from factory pickup to final delivery.

Example: Your supplier in Guangzhou quotes you EXW. You arrange a truck to pick up from their factory, handle export customs, book ocean freight, handle import customs at your destination, and arrange last-mile delivery.

Best for: Experienced importers with established freight forwarding relationships who want maximum control over shipping costs. Not recommended for beginners.

FOB — Free on Board

What it means: The seller is responsible for getting goods to the port of origin and loaded onto the vessel. Once the goods are on the ship, responsibility and risk transfer to you.

Risk transfers: When goods are loaded onto the ship at the Chinese port.

Cost responsibility: Seller covers factory → export clearance → port → loaded on ship. Buyer covers ocean freight → insurance → import clearance → final delivery.

Example: Your supplier quotes FOB Shenzhen. They deliver goods to Shenzhen port and clear them for export. You pay for ocean freight from Shenzhen to Los Angeles, marine insurance, US customs clearance, and delivery to your warehouse.

Best for: Most importers. FOB is the most commonly used Incoterm for China exports because it splits responsibility clearly and allows buyers to control their freight costs by choosing their own forwarder.

CIF — Cost, Insurance, and Freight

What it means: The seller pays for ocean freight and insurance to the destination port. Risk transfers when goods are loaded on the vessel — same as FOB — but the seller also arranges freight and insurance to the destination.

Risk transfers: When goods are loaded on the ship (same as FOB).

Cost responsibility: Seller covers everything to destination port including freight and insurance. Buyer covers import clearance and final delivery from destination port.

The catch: The seller arranges and pays for shipping — but their insurance covers the shipment at seller’s risk level, not yours. If there’s a claim, you’re dealing with their freight forwarder’s insurance, not your own. This is why experienced importers often prefer FOB + their own marine insurance.

Best for: Buyers who want simplicity on their first few orders and don’t yet have their own freight forwarder.

DDP — Delivered Duty Paid

What it means: The seller is responsible for everything — all the way to your door. Export clearance, freight, insurance, import duties, taxes, and final delivery are all the seller’s responsibility.

Risk transfers: At your door (or named delivery point).

Cost responsibility (seller): Everything, including import duties in your country.

Example: Your supplier quotes DDP to your warehouse in New Jersey. They arrange everything. You receive goods at your door with all duties paid.

Best for: Small buyers or those who don’t want to deal with logistics at all. Also useful for testing a new supplier without the complexity of managing your own freight chain.

The catch: DDP pricing is often significantly higher than FOB because the supplier is adding their logistics margin (plus a risk buffer) into the price. You also lose visibility into what the actual shipping and duty costs are. For larger volumes, you’ll almost always save money by switching to FOB and managing logistics yourself.

Side-by-Side Comparison

Incoterm	Seller Arranges	Buyer Arranges	Risk Transfer Point
EXW	Nothing after production	Everything	At factory
FOB	Factory → Port → On ship	Ocean freight onwards	On ship at origin port
CIF	Factory → Destination port + freight + insurance	Import clearance onwards	On ship at origin port
DDP	Everything, including your import duties	Nothing	Your door

Which Incoterm Should You Use?

Use FOB if:

You’re importing regularly and have your own freight forwarder
You want to control your freight costs (choose your own carrier, negotiate your own rates)
You’re shipping larger quantities (half-container or full container)
You understand the import customs process in your country

FOB is the standard choice for most experienced importers.

Use DDP if:

You’re placing your first few orders and don’t want logistics complexity
Your order value is small enough that the premium for DDP isn’t significant
You want a fully landed cost number to calculate margins easily

Use EXW only if:

You have a freight forwarder in China who handles pickup and export clearance for you
You want maximum control over every step
You understand Chinese export customs procedures

Avoid CIF for large orders:

The supplier arranging insurance sounds convenient, but you lose control over insurance coverage and can’t choose your freight forwarder. For significant shipments, FOB + your own marine insurance is better.

The Hidden Costs People Miss

Regardless of which Incoterm you use, make sure you’ve accounted for:

Import duties — Check the tariff rate for your product HS code in your destination country
VAT or GST — Many countries charge consumption tax on imports
Customs broker fee — Usually $100–$300 per shipment in the US
Port handling / THC — Terminal handling charges at destination
Last-mile delivery — From port or freight terminal to your warehouse
Marine insurance — Usually 0.3–0.5% of cargo value

For FOB shipments, all of these are your responsibility. For DDP, the seller is supposed to cover them — but verify what exactly is included in their DDP quote.

Frequently Asked Questions

My supplier always quotes EXW — is that normal?

Yes. Factories often prefer EXW because it removes their responsibility after production. You can accept EXW and arrange your own freight forwarder in China to handle pickup and export, or you can ask the supplier to quote FOB instead.

What’s the best Incoterm for Amazon FBA shipments from China?

Most FBA importers use DDP for their initial orders (simplicity) then switch to FOB as they grow and want better control over logistics. DDP to an FBA warehouse is technically complex — confirm with the supplier what “DDP Amazon FBA” covers exactly.

Can I negotiate the Incoterm?

Yes. The Incoterm is part of the commercial negotiation. Suppliers will generally accommodate your preferred Incoterm, though they may adjust pricing accordingly.

What’s the difference between FOB China and FOB destination?

Standard FOB is the port of loading (FOB Shanghai, FOB Shenzhen, etc.). “FOB destination” is a completely different term used in domestic US trade and is essentially similar to DDP. Don’t confuse the two.