EXW, FOB or DDP: where the supplier stops and you start

Two quotations for the same goods can differ by a large margin and both be honest, because they stop at different points on the journey. The three letters next to the price decide where the supplier’s job ends and yours begins, and a buyer comparing an EXW number against an FOB number is not comparing prices at all.

What follows is the practical shape of it. The binding definitions are the ICC’s, they are revised periodically, and your freight forwarder is the person who should confirm which version and which term your contract actually uses — that is their job and they are better at it than either of us.

Where each term hands over

EXW

The goods are made available at the supplier’s premises. Practically everything after that is yours: collection, inland transport to the port, export formalities, main freight, import clearance, duties, and delivery at the other end.

It produces the lowest headline number, which is exactly why it is the most misleading one to compare against. It also puts export-side paperwork on a party that is not in the export country, which is why buyers who take EXW usually end up appointing a local agent to do the part they cannot do themselves.

EXW makes sense when you already have a consolidator in the origin country collecting from several suppliers. It rarely makes sense for a first order.

FOB

The supplier gets the goods to the named port and handles export formalities. You take over from there: main freight, insurance, import clearance, duties, and inland delivery.

This is the common default in this trade, and it is a fair comparison point between suppliers because the origin-side costs are inside the number rather than waiting for you.

One practical caveat worth raising with your forwarder: FOB was written around goods loaded on board a vessel, and for containerised cargo handed over at a terminal there is a widely recommended alternative term that fits the actual handover better. Plenty of trade runs on FOB regardless. Ask your forwarder which is right for how your goods actually move.

DDP

The supplier delivers to your door with import clearance and duties handled. One number, no surprises — where it is genuinely available.

The reason it is often not: it requires the supplier to act as importer into a market they may have no standing in, and to price duties and taxes they cannot control. A supplier who quotes DDP casually into an unfamiliar market has either done this before or has not thought it through, and it is worth establishing which.

What is not in the price, whichever term you use

These sit outside the goods and catch people out regardless of the incoterm:

• Destination charges. Terminal handling, documentation and delivery-order fees at the arrival port are billed locally and are not in an FOB number.
• Duties and taxes. Set by your market and your product’s classification, not by the supplier. Get the classification confirmed early — it is a bigger variable than most people expect.
• Insurance. Not automatic under either EXW or FOB. If nobody bought it, nobody has it.
• Customs brokerage. Someone has to file at your end and they charge for it.
• Demurrage and storage. If clearance stalls, the clock runs. This is the cost that turns a small paperwork problem into a large invoice.

How to compare two quotations honestly

1. Get both on the same term before comparing anything. If one supplier quotes EXW and the other FOB, ask the first for an FOB number rather than doing the arithmetic yourself.
2. Add the destination-side estimate from your forwarder, once, and apply it to both. It is roughly the same for both, which is why it can be estimated rather than quoted.
3. Check the packing cube. A carded piece ships at several times the volume of a loose one, and freight is charged on space. Two similar piece prices can land very differently.
4. Read the validity date. Quotations expire, and freight rates move faster than factory prices.

What to state in the enquiry

Say the term you want quoted, the destination port or city, and whether you have a forwarder already. Those three lines remove most of the back-and-forth, and they let a quotation come back comparable to the other quotations sitting on your desk.

If you do not have a forwarder yet, say that too. It changes the sensible recommendation, and it is a normal position to be in on a first order.