A Detailed Guide to DDP, DAP, FOB, and EXW for Chinese Importers

When providing a quote, suppliers often include a three-letter code—such as EXW, FOB, DAP, or DDP—alongside the price. First-time importers often compare these options and simply choose the cheapest one. However, this approach can lead to paying twice for the same shipping costs, disputes over who covers port charges, or even discovering that no one has arranged for customs clearance.

Those three letters represent Incoterms® rules. These rules define where the supplier's responsibilities end and yours begin: who pays for shipping, who handles import and export customs formalities, and who covers duties. They also determine the point at which liability for damaged or lost goods shifts from the supplier to you.

Written in plain language, this guide explains the four terms most frequently encountered by Chinese importers, drawing on the expertise of our Shenzhen-based team that handles these shipments daily. By reading this guide, you will gain a clear understanding of what is—and isn't—included in your supplier's quote.

1. What Incoterms® Are (and What They Aren't)

Incoterms® (International Commercial Terms) are a set of trade terms established by the International Chamber of Commerce (ICC). The current version, Incoterms® 2020, comprises 11 rules and came into effect on January 1, 2020. As of the time of writing (September 2026), it remains the latest version recognized by the ICC.

Each rule addresses three practical questions:

Delivery: When the seller hands the goods over to you.

Risk: The point at which the risk of loss or damage shifts from the seller to you.

Costs and Tasks: Who pays for and arranges transport, export clearance, import clearance, and relevant duties.

Equally important is what Incoterms do *not* cover. According to the ICC's guidelines for the 2020 rules, they do not determine prices, payment terms, remedies for breach of contract, or the timing of the transfer of ownership of the goods. These matters must be explicitly agreed upon separately in a purchase order or contract. An Incoterm cited in a price quote cannot replace a formal agreement signed with the supplier.

The ICC also categorizes the rules into two groups:

Any mode of transport: EXW, FCA, CPT, CIP, DAP, DPU, and DDP.

Sea and inland waterway transport only: FAS, FOB, CFR, and CIF.

Keep that distinction in mind. As we will see later, it is crucial for FOB.

2. EXW (Ex Works): You take delivery of the goods at the factory gate.

Under EXW trade terms, the seller's only responsibility is to have the goods ready and placed at its premises or another named place on the agreed date. From that moment on, the risk is with the buyer.

As the buyer, you are responsible for:

Pick up the goods from the factory (under EXW terms, the seller is not even obligated to load the goods onto your truck).

Customs clearance of export goods from China.

International freight and insurance.

Import clearance, duties and taxes in your country.

Deliver to your warehouse or logistics processing center.

Why the EXW model is so attractive: Its quotation is always the lowest, because the supplier's price almost only includes the cost of the product itself, with no other additional costs.

Why this often causes trouble: In China, export procedures need to be handled by local people who are responsible for handling them. Small foreign buyers usually do not have this ability. In reality, it is the freight forwarder or factory that handles these procedures, so the additional costs and delays are borne by the buyer. The International Chamber of Commerce recommends that whenever possible, parties should choose FCA terms rather than EXW terms, because under FCA terms, the seller is responsible for handling export formalities. The Dutch Chamber of Commerce (KVK) also made the same suggestion and pointed out that the EXW trade term is not compatible with the letter of credit payment method.

The EXW model is applicable when you already have a freight forwarder in China, who is responsible for picking up the goods from the factory, handling export procedures, and quoting clear fees to you. Without such a freight forwarder, the EXW model is simply a trap for beginners.

3. FOB (Free On Board): A common pricing method in China

FOB is the term you will most frequently encounter on price quotes from Chinese suppliers, typically appearing as "FOB Shenzhen" or "FOB Ningbo."

Under FOB terms, the seller:

Transports the goods to the designated port of shipment.

Handles export customs clearance procedures within China.

You bear the risk until the goods are loaded onto the vessel you have designated.

As the buyer, you are responsible for ocean freight, insurance, destination-related charges, import customs clearance fees, duties, and final delivery costs. You also have the freedom to select your own shipping company or freight forwarder, giving you control over shipping costs, routes, and transit times.

Why do importers prefer FOB? Because it allows for a fair division of responsibilities. The factory handles the part it does best—getting the goods out of China—while you control the aspect that most significantly impacts costs: international shipping. Additionally, this method makes it easier to compare quotes from different suppliers.

FOB Container Issues

Here are some details often overlooked in most guides. FOB is one of the four Incoterms rules that apply "only to sea and inland waterway transport." It is intended for cargo that is loaded directly onto a vessel. However, the vast majority of small shipments from China are transported in containers or on pallets; these goods are typically delivered to a warehouse or container terminal days before actual loading onto the ship.

The International Chamber of Commerce (ICC) recommends FCA (Free Carrier) as the more appropriate term for containerized and multimodal transport, as the point of delivery aligns with the actual handover of the goods. KVK notes that FOB is suited for bulk or general cargo that can be inspected at the moment of loading—something impossible with sealed containers. The 2020 rules also introduced an option under FCA for the seller to obtain an on-board bill of lading, thereby eliminating one of the reasons people continued to use FOB.

In practice, however, the term "FOB" remains widely used for container shipments in China. Since this local trading practice is well understood by all parties, it generally operates smoothly. The key takeaway is this: if you choose FOB, you must ensure that both contracting parties and the freight forwarder agree on which pre-loading costs are to be borne by the supplier. Terminal handling charges and documentation fees at the port of loading are frequent sources of dispute.

If you would like to understand the differences between this term and older terms like DDU, please submit a request via the form on our website or consult our previously published guide on shipping terms.

4. DAP (Delivered at Place): Goods are delivered directly to your doorstep, and you are responsible for customs clearance.

Under DAP terms, the seller is responsible for arranging and transporting the goods to a designated destination, such as your warehouse or a specific address. Upon arrival, the goods are delivered by truck and are ready for immediate unloading.

Key Points:

The seller bears the risk until the goods arrive at the designated location.

Unloading is generally the buyer's responsibility.

Although the seller pays the freight costs, the buyer remains responsible for import clearance, customs duties, and import taxes.

This last point often catches people off guard. DAP terms may appear to offer an all-inclusive final price, but that is not actually the case. Once the goods arrive, someone must handle import formalities and pay customs duties, as well as import VAT or sales tax. Under DAP terms, that responsibility falls on you. If you fail to arrange for a customs broker, the goods may get stuck at the port or airport, incurring storage fees.

When to use DAP terms: DAP is a suitable choice when you want the supplier to handle the shipping logistics but prefer to retain control over import declarations, duty payments, and related tax records. As explained in the next section, the ICC recommends prioritizing DAP over DDP terms whenever possible for certain reasons.

5. DDP (Delivered Duty Paid): The seller bears all responsibilities.

DDP entails the highest level of responsibility for the seller. The seller is responsible for transporting the goods to your designated destination, handling export formalities in China, managing import procedures in your country, and covering all relevant import duties and taxes. Risk transfers to you only when the goods are actually delivered to you.

For small-scale importers, this model is ideal: a single price, with no need to handle customs formalities or make logistical arrangements. This is precisely why the DDP model is highly favored by Amazon sellers sourcing products from China. However, this model also comes with some significant drawbacks.

Who is the actual importer?

Customs authorities need to know the identity of the importer because that party bears legal responsibility for the accuracy of the declaration. The International Chamber of Commerce (ICC) warns that some countries restrict foreign sellers from handling import formalities themselves, which can prevent the DDP (Delivered Duty Paid) model from functioning correctly. For instance, in the EU, the European Commission stipulates that the customs declarant should generally be based within the EU; non-EU enterprises conducting customs-related business within the EU must possess an EORI number. KVK concludes that the DDP model is difficult to implement for sellers without a business presence in the destination country, and its use between companies is extremely rare.

Therefore, when a Chinese supplier quotes a price on a DDP basis, you should ask about their specific operational method. Typically, these suppliers delegate the task to freight forwarders, who handle customs clearance acting as third-party importers. This practice can lead to issues that often only come to light after some time.

To reduce customs duties, the value of goods may be deliberately undervalued, or incorrect product codes used. If customs authorities challenge this, the company receiving the goods could face serious consequences.

Without an import VAT invoice issued in your name, you may be unable to claim a refund for import VAT as you normally would.

It is impossible to determine exactly which duty rates were applied, meaning your landed cost can only be estimated.

The price may appear low until you receive a bill for "additional duties."

DDP terms are suitable only when there is a reliable and transparent logistics provider who can inform you of the official importer, provide copies of import declarations, and itemize the various duties and taxes. Always consult your customs broker when selecting a new supplier and adopting DDP terms.

6. How to Choose: A Simple Decision-Making Guide

There is no single "best" Incoterm. The right choice depends on the level of control you desire and your experience level. For small business importers, our team generally approaches the decision this way:

For a first-time order with a small volume and no existing freight forwarder: Obtain quotes for both FOB (or FCA) and DAP terms. Before deciding, compare these shipping costs with quotes from an independent freight forwarder.

For regular ocean shipments, if you want the best freight rates, choose FOB or FCA terms at the Chinese port; this allows your freight forwarder to manage the entire transport process and import customs clearance.

If you want door-to-door delivery while retaining control over customs procedures and duties, choose DAP—this allows you to arrange your own customs broker to handle these matters before the goods arrive.

If you already have a freight forwarder handling pickup from the factory: Use EXW or FCA terms (delivery at the factory), provided that export customs clearance is properly managed.

DDP: Only use this method with transparent service providers and after clearly establishing who the Importer of Record is.

If you want a quick recommendation tailored to your specific shipment, try our free Incoterms decision-making tool. To see how a choice affects the total cost per unit, simply enter the relevant data into the formula on our website's Landed Cost Calculator.

7. Checklist: Be sure to review this before accepting any Incoterms from a supplier.

Is the location clearly specified? Simply stating "FOB China" is insufficient. The ICC recommends specifying the location as precisely as possible—such as the specific port name or a full address.

Is the version clearly stated? Specify the rule, the applicable location, and the version number (e.g., "FCA [specific location] Incoterms® 2020") to avoid disputes regarding which rules apply.

Are origin-related costs clearly defined? Ask the supplier which local charges are included in their quote (such as transport to the port, terminal handling charges, and documentation fees).

Who handles customs formalities at both ends? Specify the responsible parties.

Who insures the goods, and what is the coverage amount? Under most rules, insurance is not automatically included in the terms. Only CIF and CIP require the seller to provide insurance; notably, under the 2020 rules, the ICC mandates a higher level of insurance coverage for CIP than for CIF.

Do the payment terms align with the place of delivery? Avoid paying the full amount before the risk of the goods has transferred to you, unless you have already inspected the goods.

Has the supplier been verified? No trade term can protect you from suppliers who fail to ship the goods. Follow our guidelines to address this risk: verify Chinese suppliers before paying any deposit.

8. Common Mistakes We See in Shenzhen, China

Comparing EXW quotes directly with DDP quotes as if they were for the same product is incorrect; in reality, these two services are completely different. Before comparing them, you should convert both quotes into a "landed cost" figure.

Paying for shipping twice. A supplier might provide a CIF or DAP quote, while your freight forwarder separately arranges the main freight. You need to determine who is responsible for arranging transport before the goods are ready.

Assuming DAP means duties have been paid. This is not the case; under DAP terms, you remain responsible for customs duties and import taxes.

Accepting DDP shipments without accompanying documentation. Without seeing the import declaration, you have no way of knowing exactly what goods were declared in your name.

Skipping inspections because "the risk lies with the seller." Risk transfer covers only loss or damage during transit, not defects that existed at the factory. Pre-shipment inspections are designed to identify such issues. Please refer to our content: Factory Inspection Checklist for First-Time Importers.

When to Seek Ground Support

In theory, Incoterms may seem straightforward, but in practice, they often give rise to various issues. These problems can occur at any stage of the process—from transport between the factory and the port and undisclosed terminal handling charges to delayed export documentation or difficulties contacting a freight forwarder under "DDP" terms.

Having a team in China to assist you makes a significant difference. Our Shenzhen-based team can review your supplier's quotes, clarify the specific implications of the trade terms, collect goods from the factory, handle export formalities, arrange sea or air freight, and coordinate with customs brokers at the destination. You can fill out a form on our website to request a quote or learn more about our operational processes.

If you have a shipment pending and would like a second opinion on the terms, please request a quote and share the offer provided by your supplier with us.