Three letters on a quote decide who pays for what — and where your responsibility begins and ends. If you've ever compared two quotes and couldn't tell why one was $2 cheaper per piece, this is usually the reason. Here's what the three most common terms actually mean, without the legalese.
What an Incoterm actually is
An Incoterm is a three-letter code (defined by the International Chamber of Commerce, used worldwide) that answers one question: at which point does the seller's job end and yours begin? Everything before that point is the seller's cost and risk. Everything after is yours.
The three you'll actually see
EXW — Ex Works: “from the factory door.” The seller makes the goods available at their factory. From that moment, everything is on you: export clearance, trucking to port, ocean freight, customs in your country, delivery to your door.
- The quote looks cheapest — because it includes the least.
- Reality: you now need a freight forwarder in China, and you carry all risk from the factory door onward.
- Makes sense for: experienced importers who already have a forwarder and want full control.
FOB — Free On Board: “loaded on the ship.” The seller handles everything up to and including loading the goods onto the vessel at a Chinese port. From the ship onward — ocean freight, insurance, import clearance, duties, final delivery — it's yours.
- The most common term in international trade.
- Reality: you still need someone to handle the ocean leg and your country's import process.
- Makes sense for: buyers who have a freight forwarder but want the factory to manage export logistics.
DDP — Delivered Duty Paid: “to your door, everything included.” The seller handles the entire journey — production, export, freight, import clearance, duties and taxes, final delivery. The price on the quote is the price of the goods at your door.
- The quote looks highest — because it includes the most.
- Reality: nothing to arrange, no surprise invoices from customs brokers, no phone calls about port fees.
- Makes sense for: first-time importers, small brands, and anyone whose time is worth more than the margin difference.
Side by side
| EXW | FOB | DDP | |
|---|---|---|---|
| Production | Seller | Seller | Seller |
| Export clearance (China side) | You | Seller | Seller |
| Ocean/air freight | You | You | Seller |
| Import clearance & duties (your side) | You | You | Seller |
| Final delivery to your door | You | You | Seller |
| Quote appears | Lowest | Medium | Highest |
| Surprise costs | Most | Some | Fewest |
Notice the pattern: the cheaper the term looks, the more work and risk lands on you.
Three questions to ask before you accept any quote
- “Which Incoterm is this quote?” — if it's EXW, add 20–40% mentally before comparing it with anything else.
- “Is freight included, and by which method?” — sea, Matson or air changes both cost and delivery date. See Sea vs Air Freight for the trade-offs.
- “Who handles customs and duties in my country?” — “you'll need a broker” is an answer that costs you a week and a broker's fee.
How we do it
We default to quoting DDP-style, itemised: production, tooling if any, freight by the method you choose, and delivery to your door — each line visible, nothing left for you to arrange. If you prefer EXW or FOB with your own forwarder, that works too. It's the same principle behind our Custom Sourcing service: one point of contact, everything in writing.
Next step: send your product idea and destination country — we'll return a door-to-door quote with every line itemised.
Related reading: How to Pay Safely · Full Cost Breakdown