DDP, FOB or EXW: which incoterm should I use for components from China?
Reviewed · ICBOMS sourcing desk, Shenzhen
The choice is really one question: who do you want to be the importer of record. Under EXW you take the goods at the supplier's door and own everything after that, including export formalities. Under FOB the supplier gets the goods to the port and you arrange freight, insurance and import from there. Under DDP the supplier delivers to your address with duties paid, and the supplier — or the forwarder acting for them — is the importer on the paper. For a small or mixed component shipment, the deciding factor is rarely the freight rate; it is which side can actually complete the customs formalities and absorb a clearance problem without freezing your production.
What each one transfers
- EXW (ex works): you collect. Export declaration, freight, insurance, import duty and clearance are yours. Cheapest line on paper, and usually the worst choice if you have no presence in China.
- FOB (free on board): the supplier clears export and delivers to the vessel; you take over at the port of loading. Standard for full containers, awkward for the 5 kg parcel most component orders actually are.
- DDP (delivered duty paid): the seller delivers to your address with import duties paid and clearance handled. One invoice, one tracking number, no broker to appoint — and the seller is the importer of record on that entry.
Why DDP is common for components and where it bites
Component orders are small, mixed and frequent, which means the fixed cost of customs — classification, duty assessment, broker fees, and the time to resolve a query — dominates. Consolidating several suppliers' parts into one DDP shipment replaces several customs entries with one and removes the case where a single misdeclared line holds the whole order.
The trade-off is that you are not the importer of record, so the entry is not in your name. Where a buyer needs that for their own accounting, duty recovery or compliance records, DDP is the wrong instrument regardless of convenience — that is a fact about your obligations, not about the shipment.
The part people forget: classification
Whatever the incoterm, someone has to state what the goods are — a tariff classification and a declared value that matches the invoice. Two mistakes are common in component shipments: describing parts generically rather than by their actual function, and splitting or merging lines in a way that does not match the packing list. Both produce holds that cost more than any freight difference between the terms.
A practical rule
Full container of one part number, and you have your own customs setup: FOB is straightforward. Mixed, small, frequent component orders: DDP removes the most failure modes, unless you specifically need to be the importer of record. EXW makes sense only when you already have people and a broker on the ground.
Put this to work on your list
Send the part numbers or the whole BOM. Each line comes back with what can be sourced, its condition, and the cross-references where they exist — then the lines ship together.