EXW vs FOB vs DDP - Incoterms

When importing from China, it is common to come across commonly used incoterms (International Commercial Terms) such as EXW, FOB and DDP. In fact many suppliers in China may use these terms in their dealings with you. This is especially so because many suppliers and manufacturers in China tend to operate on an EXW basis. Therefore, when they inform you that the order will be done on an EXW basis, what exactly do they mean? What are the differences between EXW, FOB and DDP? What do EXW, FOB and DDP stand for?


Ex Works (EXW)

This means that the seller makes the goods available at its location so the Buyer can take over all the transportation costs. The Buyer also bears the risks of taking the goods to their final destination.


Under EXW, here are the Seller’s Obligations:


Goods, commercial invoice, and documentation

Place goods at Buyer’s disposal at the named place on the agreed-upon date (a.k.a Cargo Ready Date (CRD))

Notice to the Buyer to enable the delivery

Export packaging and marking

The Buyer’s Obligations:

Pay the price of the goods as stated in the sales contract

Provide Seller with evidence of having taken delivery

Loading at Seller’s location (unless otherwise agreed upon)

Export licenses and customs formalities

Assess HS Code Classification for import

Pre-carriage to terminal

Loading charges

Main carriage

Discharge and onward carriage

Import documentation and duties

Cost of pre-shipment inspection


With EXW (Ex Works), the seller is not obligated to load the goods on the buyer's designated method of transport. Instead, the seller must make the product available at a selected location, and the buyer must incur transportation costs.


Free On Board (FOB)


The Seller transports and is responsible for the goods until they’re loaded onto the ship at an agreed-upon port. The Buyer is responsible for everything until the shipment arrives at the final destination.


The Seller’s Obligations:

Goods, commercial invoice, and documentation

Export packaging and marking

Export licenses and customs formalities

Pre-carriage and delivery

Loading charges

Delivery onboard vessel at the named port of shipment

Proof of delivery

Cost of pre-shipment inspection

The Buyer’s Obligations:

Payment for goods as specified in the sales contract

Main carriage

Discharge and onward carriage

Import formalities and duties

Cost of pre-shipment inspection (for import clearance)


Unlike EXW, when a buyer and a seller enter a Free on Board (FOB) trade agreement, the seller is obligated to deliver the goods to a destination for transfer to a carrier designated by the buyer. The location designation in the FOB trade agreement is the point at which ownership is transferred from the seller to the buyer. The responsibility often shifts at this arrival location. The seller is responsible for transporting goods up until this point, but the buyer may or may not be responsible for all transportation arrangements from this point to their location, depending on the terms of the agreement.


Delivered Duty Paid (DDP)


The Seller is responsible for delivering the goods to the named destination in the country of the Buyer. The Seller also pays all costs in bringing the goods to that agreed-upon final destination.


The Seller’s Obligations:

Goods, commercial invoice, and documentation

Export packaging and marking

Export licenses and customs formalities

Pre-carriage and delivery

Loading charges

Main carriage

Proof of delivery

Import formalities and duties

Cost of all inspections

Delivery to the named place of destination

The Buyer’s Obligations:

Payment for goods as specified in the sales contract

Assist Seller in obtaining any documents or information necessary for export or import clearance formalities


Delivered duty paid (DDP) is a delivery agreement whereby the seller assumes all of the responsibility, risk, and costs associated with transporting goods until the buyer receives or transfers them at the destination port.


This agreement includes paying for shipping costs, export and import duties, insurance, and any other expenses incurred during shipping to an agreed-upon location in the buyer's country.


DDP can be contrasted with DDU (deliver duty unpaid).


Delivered duty paid (DDP) is a shipping agreement that places the maximum responsibility on the seller. In addition to shipping costs, the seller is obligated to arrange for import clearance, tax payment, and import duty. The risk transfers to the buyer once the goods are made available to the buyer at the port of destination. The buyer and seller must agree on all payment details and state the name of the place of destination before finalizing the transaction.


DDP was developed by the International Chamber of Commerce (ICC) which sought to standardize shipping globally; hence, DDP is most commonly used in international shipping transactions. The benefits of DDP lean in favor of the buyer as they assume less liability and fewer costs in the shipping process, this, therefore, places a great deal of burden on the seller.


What Is the Difference Between DDP and DDU?


In the world of shipping, delivered duty unpaid (DDU) simply means that it's the customer's responsibility to pay for any of the destination country's customs charges, duties, or taxes. These must all be paid in order for customs to release the shipment after it arrives.


On the other hand, delivered duty paid (DDP) means it's the shipper's responsibility to pay any of the customs charges, duties, and/or taxes required to send the product to the destination country.


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EXW vs FOB vs DDP - Incoterms
EXW vs FOB vs DDP - Incoterms