A supplier quotes you "$3.40 per unit, DDP to your door." It sounds clean — one price, no surprises, they handle everything. Then another buyer tells you they pay $2.95 for the same product and arrange their own shipping. Same factory tier, same spec. The difference wasn't luck. It was the shipping term.

DDP, FOB, and EXW aren't just jargon — they decide who controls the freight, who eats the risk, and how much hidden markup you're paying. Here's how I choose between them for clients, with real numbers.

The Three Terms in Plain English

Incoterms define where the factory's responsibility ends and yours begins. The three you'll actually see:

  • EXW (Ex Works) — the pure product price, at the factory door. You handle everything: pickup, export customs, freight, import, delivery. The factory's only job is to make the goods.
  • FOB (Free On Board) — the factory gets the goods onto the ship/plane in China and clears export customs. From that point, freight and import are yours. This is the most common term for sea freight.
  • DDP (Delivered Duty Paid) — the factory (or their forwarder) handles everything to your door, including import duties. You pay one all-in price and do nothing.

The Hidden Markup in DDP

DDP feels safe because it's simple. But simplicity has a price — literally. When a supplier quotes DDP, they're not doing your logistics out of kindness. They're:

  • Marking up the freight — often 15%–30% above what a forwarder would charge you directly.
  • Bundling the duty — you can't see the duty line, so you can't verify it.
  • Choosing their forwarder — whose loyalty is to the supplier, not you.

I've broken down DDP quotes where the embedded freight markup alone was more than the entire product-cost saving the buyer thought they'd won. DDP isn't wrong — it's just the most expensive way to be hands-off, and you give up visibility at exactly the moment (import customs) when surprises cost the most.

Why FOB Is Usually the Sweet Spot

For most sea-freight orders, FOB is where I land clients. Here's why:

  • You control the freight. You pick your own forwarder, get real market rates, and can compare quotes. No bundled markup.
  • You see the duty. Your own forwarder clears import, so the duty is a visible, verifiable line — critical now that US tariff rates are stacked and product-specific.
  • You keep leverage. If something goes wrong in transit, your forwarder works for you.

The trade-off: FOB means you're coordinating a forwarder and owning the import side. That's more work than DDP — but with a good forwarder (or a sourcing agent managing it), it's routine, and the savings are real.

When EXW Makes Sense

EXW looks like the cheapest quote because it's just the product. And it's the right choice when:

  • You're consolidating from multiple factories. If you buy from three suppliers, EXW lets one forwarder (or agent) pick up from all three, combine everything into one container, and ship once. The freight saving from consolidation usually dwarfs the pickup cost.
  • You want the cleanest cost breakdown. EXW forces product cost and logistics cost into separate, visible numbers — so you know exactly where your money goes.

The catch: EXW means you own export customs in China too, which a foreign buyer can't do directly. In practice, "EXW" for an overseas buyer really means "your agent/forwarder handles the China side." That's fine — it's how consolidation works — but know that you'll need someone on the ground.

A Real Comparison

Here's an actual-shaped example from a recent 20ft container of household goods, Guangdong to the US West Coast:

  • Supplier's DDP quote: all-in landed cost worked out to roughly $4,150 above the product cost, bundled and opaque.
  • FOB + our own forwarder: sea freight + clearance + duty came to about $3,060 — and every line was itemized.

That's a ~26% difference on the logistics side, just by switching terms and owning the freight. On bigger or repeat orders, this is where the real margin lives.

My Rule of Thumb

  • Small air shipment, first order, want zero hassle? DDP is acceptable — you're paying for simplicity. Just know you're paying for it.
  • Sea freight, most orders? FOB + your own forwarder. Best balance of control and cost.
  • Multiple suppliers, or you want total cost clarity? EXW with an agent/forwarder consolidating on the China side.

And one rule that never changes: always get the EXW price first. It separates product cost from logistics, so when a supplier quotes FOB or DDP you can see exactly how much they're adding for freight — and whether it's fair.

The Bottom Line

DDP is the most expensive way to be hands-off; FOB with your own forwarder is usually the sweet spot; EXW wins when you're consolidating or want a clean cost breakdown. The term you pick decides whether you control the freight — and whether you can even see what you're paying for it.

I arrange freight for clients on all three terms and always pull the EXW number first, so the markup has nowhere to hide. If you've got a DDP quote and suspect there's padding in it, send it over — I'll break it down and tell you what it should actually cost.