In short: with EXW the buyer handles everything from the factory gate onward, with FOB the supplier gets the goods loaded onto the ship and the buyer takes over from there, and with DDP the supplier (or sourcing agency) handles everything, customs and duties included, all the way to delivery. For anyone importing from China for the first time, DDP is almost always the safer choice because it removes the variables that most often turn into hidden costs and delays.
Incoterms (International Commercial Terms) are standardized rules set by the International Chamber of Commerce that define, step by step, who pays for freight, who bears the risk of damage or loss, and who handles export/import customs at each stage of a shipment. They have nothing to do with ownership of the goods or payment terms — only with logistics and risk. Picking the wrong incoterm is one of the costliest mistakes in China sourcing, because it can shift responsibilities onto you that you're not equipped to handle.
Under EXW, the supplier makes the goods available, packaged, at their own warehouse or factory, and from that point on everything else — trucking, domestic transport in China, export clearance, ocean freight, import clearance, final delivery — is the buyer's cost and risk. EXW looks like the cheapest number on the invoice, but in practice it requires a trusted forwarder inside China and logistics know-how that most first-time importers simply don't have. It only makes sense once you already have a solid local logistics partner in place.
Under FOB, the supplier handles domestic transport, export clearance, and loading the goods onto the vessel at the origin port (typically Shanghai, Ningbo, or Shenzhen). From that point — ocean freight, insurance, import clearance, final delivery — it's on the buyer. FOB is the most widely used incoterm because the supplier manages the part they know best (Chinese domestic logistics), while the buyer still controls the choice of international freight forwarder, often securing better freight rates on regular volume.
Under DDP, the seller (or the sourcing agency coordinating the shipment) covers domestic transport, international freight, export clearance, import duties and VAT, import clearance, and delivery to the final address. The buyer receives goods ready for warehouse intake at a single price agreed upfront. It looks like the most expensive option on paper, but it's often the cheapest in practice because it removes hidden costs, customs delays from missing paperwork, and the need to juggle multiple service providers — a forwarder, a customs broker, a local trucker — in a country you don't know.
| Incoterm | Who pays freight | Who handles customs | Buyer's risk | Best for |
|---|---|---|---|---|
| EXW | Buyer, from factory gate | Buyer (export and import) | High | Experienced importers with a China-based forwarder |
| FOB | Buyer, from origin port | Supplier (export) / Buyer (import) | Medium | Businesses importing regular volume who want freight control |
| DDP | Supplier/agency, to final delivery | Supplier/agency | Low | First orders, SMEs without in-house logistics |
The real advantage of DDP isn't just the all-in price — it's predictability: you know exactly what the goods will cost landed in your warehouse before you even place the order, which makes margin calculation and cash flow planning far easier. Sourcewithme's DDP Logistics service is built exactly for this: a single price agreed before production starts, customs and freight managed by one point of contact, and no surprises when the goods arrive in Italy or the US.
If you're not sure which incoterm applies to your next order, request a free feasibility study on the contact page and we'll tell you exactly what it would cost under each option.
FAQ
The difference is where the supplier's responsibility ends: under EXW it ends at the factory gate, under FOB it ends at the origin port once goods are loaded onto the vessel, and under DDP it extends all the way to final delivery, duties and customs included.
DDP is generally the safest choice for anyone without logistics experience in China, since the supplier or sourcing agency manages freight, customs and duties under a single price agreed in advance, eliminating most hidden costs.
Under FOB, international ocean freight is paid by the buyer, who chooses and pays the freight forwarder directly for transport from the origin port to the final destination, in addition to handling insurance and import clearance.
The EXW price looks lower on the invoice because it only covers the finished product at the factory, but it leaves the buyer responsible for all transport and customs costs and risks, which without an experienced local forwarder can lead to delays and unplanned expenses.
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