Incoterms for small importers: EXW, FOB, and DDP explained
Costs & pricing · Updated
When you buy goods from a supplier in China, the Incoterm in your contract determines where your supplier's responsibility ends and yours begins. It controls who pays for freight, who is on the hook if goods are damaged in transit, and who handles customs on both sides.
Three terms come up almost every time for small China imports: EXW, FOB, and DDP. Here is what they actually mean and which one fits a small importer.
EXW (Ex Works): you own the problem from the factory door
Under EXW, the supplier's job ends the moment the goods are ready at their factory. You are responsible for everything: getting a truck to pick them up from the factory floor, export customs clearance in China, the freight, US import customs, and final delivery.
EXW gives you maximum control but maximum responsibility. For a large company with its own freight team, that is fine. For a small importer, it means sourcing and coordinating a Chinese trucking company, a China export broker, a freight forwarder, a US customs broker, and a last-mile carrier, and being liable for the goods the entire way.
EXW is rarely a good choice for small importers unless you have an established freight team. The low quoted goods price under EXW often disappears quickly once you add up all the logistics vendors you now have to hire.
FOB (Free On Board): supplier gets it on the ship, you take it from there
Under FOB, the supplier is responsible for getting the goods to the named port in China and loaded onto the vessel. Risk and cost transfer to you once the goods are on board the ship.
FOB is the most common term in international trade because it splits responsibility at a sensible point: the supplier handles Chinese export logistics (they know local trucking and customs), and you handle the ocean freight, US import, and delivery.
For small importers, FOB is reasonable but still leaves you responsible for finding and managing the freight forwarder, the US customs broker, and last-mile delivery separately.
DDP (Delivered Duty Paid): one party is responsible for everything
DDP is the opposite of EXW. The seller is responsible for delivering the goods to the named destination in the destination country, with duties and taxes paid. Nothing is left for the buyer to arrange.
In practice, when a forwarder quotes you DDP, they are the party taking responsibility for the whole chain: China pickup, export customs, ocean or air freight, US customs clearance, duty payment, and delivery to your door or FBA warehouse.
For small importers, DDP is usually the safest structure. You deal with one party, get one bill, and there is no surprise invoice from a customs broker after your goods are already moving. The risk is making sure the party quoting DDP actually controls the whole chain, rather than subcontracting each leg to unknown parties.
Which Incoterm should a small importer use?
For most small importers without their own freight infrastructure, DDP from a single freight partner is the lowest-risk and lowest-complexity structure. You pay more per kilo on paper, but you avoid managing four to five vendors, paying multiple invoices, and bearing risk across handoffs you cannot monitor.
FOB makes sense if you already have a trusted freight forwarder who handles US customs and delivery, and you want to control which carrier the goods move on.
EXW is worth considering only if you have a dedicated logistics team that can manage the China-side export process.
FAQ
What does EXW mean?
Ex Works. The supplier's responsibility ends at their factory. You pay for everything from pickup to delivery, including Chinese export customs, freight, US import customs, and last-mile delivery.
What does FOB mean?
Free On Board. The supplier loads the goods onto the vessel at the named Chinese port, then responsibility transfers to you. You pay for ocean freight, US import customs, and delivery from there.
What does DDP mean?
Delivered Duty Paid. The seller (or their freight partner) delivers the goods to your named address with duties paid. You receive the goods at your door with nothing left to settle. It is the simplest structure for a small importer.
Is DDP always more expensive than FOB?
The DDP price includes freight, customs, duties, and delivery, while an FOB price excludes those. The all-in landed cost is often similar or lower under a well-run DDP arrangement because you avoid multiple vendor markups and the coordination overhead. Get a DDP quote and compare it to the FOB price plus your real freight and brokerage costs.
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