FOB, EXW, DDP: Incoterms for first-time chair importers

What the three letters are actually for

Incoterms are a standard set of trade terms maintained by the International Chamber of Commerce. Each one answers two questions along the journey from factory floor to your warehouse: who pays for each leg, and where the risk — responsibility for loss and damage — hands over from seller to buyer. Those are separate questions, and the gap between them is where buyers get hurt: under several common terms the seller pays for a leg of the journey on which the goods already travel at your risk.

A buyer importing chairs to Australia put the recurring confusion perfectly in a forum post: every guide explained where risk transfers under FOB, and none explained who actually books and pays for the ship. So let us answer exactly that, term by term, for the three you will actually meet on chair quotes.

EXW, FOB, DDP — who does what

EXW (Ex Works). The factory’s only job is to have the goods ready at its own door. You — in practice, your freight forwarder — arrange and pay for everything: trucking to the port, China export clearance, loading, ocean freight, import clearance, duties, delivery. EXW quotes look attractively low because they exclude the entire journey. For a first-time buyer it is the wrong term: handling Chinese export formalities from abroad is friction you do not need, and an EXW seller has little stake in how well the goods leave.

FOB (Free On Board). The chair trade’s workhorse. The seller handles and pays for everything on the China side — inland haulage, export clearance, origin port charges — until the goods are loaded on the vessel, at which point cost and risk pass to you. You book and pay the ocean freight (through a forwarder you appoint), insurance, destination charges, customs, duty and final delivery. To answer the forum question directly: under FOB, you book the ship. You do it by appointing a freight forwarder, who quotes the lane, books vessel space, issues the bill of lading through their network and manages the destination side. FOB’s great virtue is that you control the expensive, variable leg — the ocean — instead of paying whatever margin the seller built into it.

DDP (Delivered Duty Paid). The mirror image: the seller prices in everything, including ocean freight, import clearance, duties and VAT in your country, and delivery to your named address. You unload. It is the only Incoterm that puts import-side cost and compliance on the seller — and that is both its appeal and its trap, as the next section explains.

Two adjacent terms you will see: CIF, where the seller pays freight and insurance to your port but — the classic gotcha — risk passes at loading, and the insurance the seller must buy is only minimum cover; and FCA, increasingly recommended in place of EXW/FOB for containerised cargo. If a quote carries a term not listed here, make the seller restate it in plain language before signing.

The DDP paper trap

DDP sounds like the beginner’s friend: one price, no logistics homework, chairs at your door. Sometimes it is. But a documented failure pattern is worth knowing before you choose it. A German buyer who ordered chairs DDP received the goods without issue — and then could not obtain the import customs declaration, because his cartons had ridden in a consolidated container cleared by the consolidator. He had no way to verify that import VAT and duty were actually paid on his goods, and a real worry about liability if they were not. That worry is well founded: consolidated DDP schemes in various markets have a history of under-declaring, and tax authorities pursue the importer of record question with hindsight.

If you buy DDP anyway — and for small trial orders it can still be the rational choice — contract for the paperwork by name: the import declaration for your consignment and proof of duty/VAT payment, deliverable with the goods, as a condition of final payment. A DDP seller who cannot promise those documents has answered your real question. The same documents discipline applies one step up: under any term, know who appears as importer of record in your country, because that name carries the compliance.

On cost, dissect any DDP price before comparing it to FOB-plus-your-own-freight. As of mid-2026, published ocean quotes are a stack: base freight plus fuel-related surcharges (typically a few hundred dollars per container at recent published bands), terminal handling at each end (roughly $100–350 per container per end in published ranges), security and documentation fees, plus destination clearance and trucking — all estimates that move; check live rate indices like Drewry’s WCI or the Freightos FBX for the current level rather than trusting a number printed here. A DDP quote bundles all of that plus duty plus margin into one figure. Sometimes the bundle is fair; you only know by unbundling it.

Choosing for your first order

My practical decision rule after years of watching first orders: if the order is a sample lot or a single pallet, let the seller quote DDP or use a marketplace logistics programme — with the document clause above — because your time matters more than the margin in the freight. The moment you are shipping by the container, or repeatedly, take FOB and appoint your own forwarder. The forwarder becomes your guide through everything that confuses first-timers (one buyer’s honest question — does the $200 “express shipping” on 50 chairs get them to my door or to a port, and what taxes hide behind it? — is exactly the question a forwarder answers before you pay, not after). You will also need the freight relationship anyway for the container-math decisions in the loading guide and the insurance decisions in the claims guide.

And whichever term you choose, write it with the named place — “FOB Ningbo”, “DDP Manchester warehouse, duty and VAT paid, import declaration to buyer” — into the same signed document as your spec and payment terms. Three letters without a place name is a quote, not a deal.