FOB vs DDP: Which Incoterm Should a First Order from China Use?

2026-08-30 · YIVAHUB Team

Incoterms decide three things: where your cost stops, where your risk transfers, and who is the importer of record. Getting them wrong is expensive in ways that only show up at the destination port.

EXW — ex works. Your cost starts at the factory door. You arrange inland transport in China, export clearance, freight and import. It looks cheapest on the quotation and is the most work: you need a Chinese freight forwarder before you can even book. Best for buyers who already have a forwarder in China.

FOB — free on board. The supplier delivers to the named Chinese port and clears export; you arrange and pay the ocean freight and everything after. This is the right default for a first order. It gives you a clean comparison — the goods price is separated from the freight, so you can see each, and you choose your own forwarder and your own insurance. It also keeps you as the importer of record, which matters for customs valuation and for your own records.

CIF — cost, insurance and freight. The supplier arranges and pays freight and insurance to your destination port. Convenient when you have no forwarder yet, but the freight is inside the price, and many suppliers add a margin there. Ask for the freight cost broken out even when you accept CIF.

DDP — delivered duty paid. The supplier handles everything including import duty and delivers to your door. Genuinely convenient for small or urgent shipments, and it removes customs from your workload. Two cautions: the duty and freight margin is hidden inside the unit price, so you cannot tell what you are paying for freight; and DDP shipments are sometimes cleared under the supplier's or a third party's importer number, which can leave you without a clean import record for your own accounting and, in the US, can create real problems if the entry is not properly declared.

The commercial reality. Different suppliers will quote different terms because each is managing their own cash flow and risk. What matters is that you compare like with like. Ask every supplier for the same term — FOB named port — and then price the freight separately yourself.

The sequence that works. Start FOB. Once volume is steady and you trust the supplier's scheduling, evaluate CIF for convenience. Use DDP only for small reorders where the time saved is worth more than the margin you cannot see. Revisit the terms annually — freight markets move, and a term that was right at one container a year may not be right at ten.

Documentation travels with the term. Under FOB you will need the bill of lading, commercial invoice, packing list and certificate of origin — and, for some destinations, a conformity certificate before the goods can clear. Decide which documents your destination requires before the shipment sails, not after it arrives.