What buyers should verify first
EXW, FCA, FOB and DDP divide delivery tasks, cost and risk differently. Compare quotations at the same named place and Incoterms 2020 rule before deciding which supplier price is lower.
| Review area | What good control looks like | Buyer action |
|---|---|---|
| EXW | Buyer controls pickup and most transport tasks | Experienced importer with local pickup solution |
| FOB | Seller delivers on board at named port | Ocean freight with buyer forwarder |
| DDP | Seller arranges delivery and import obligations | Buyer prioritizes simplicity |
| FCA | Seller hands goods to carrier at named place | Often better fit for container/air shipments |
1. Name the exact place
“FOB China” is incomplete. State the Incoterm version and precise port, terminal, factory or destination. Use a named factory address for EXW or a precise agreed handover point for FCA. Identify the destination address and unloading arrangement for DDP. A term without its place leaves the boundary of transport responsibility unclear.
2. Match the term to transport mode
FOB is defined for sea and inland waterway transport. For containerized or air freight, discuss FCA, CPT, CIP or DAP with a qualified forwarder. FCA can suit a carton or container handed to a carrier before ocean loading. FOB instead transfers risk when goods are on board the nominated vessel at the shipment port. Do not describe an air shipment as FOB merely because it departs from China.
3. Separate risk from cost
The point where risk transfers is not always the same as who arranges each expense. Map both. Draw the handover point on a simple route from factory to buyer. Under FCA at the seller's premises, loading onto the buyer's collecting vehicle is part of delivery. At another named place, delivery is on the seller's arriving vehicle, ready for unloading and available to the nominated carrier.
4. Confirm importer-of-record duties
Under DDP, taxes, registrations and importer rules can be difficult for a foreign seller. Verify feasibility before accepting a low all-in quote. Confirm who can legally carry out import formalities and account for destination taxes. Ask for the customs and delivery arrangement before treating a door-to-door quote as DDP. If the seller cannot meet the obligation, choose an appropriate term and price the buyer's remaining work explicitly.
5. Compare landed cost on one worksheet
Include origin charges, export handling, freight, insurance, duty, tax, brokerage, exams, storage and final delivery. Compare tax treatment, currency and freight assumptions consistently. A refundable import tax may be a cash-flow item rather than a permanent cost, depending on the buyer's situation. Include the cost of delayed or rejected parts separately because Incoterms do not define manufacturing acceptance.
Incoterms 2020 comparison for machined parts
| Term | Risk transfers when | Export and import handling | Buyer obligations | Best suited for |
|---|---|---|---|---|
| EXW | Goods are placed at the buyer's disposal at the named place | Buyer handles export and import | Loading, export, main carriage and import | Mostly domestic trade or experienced buyers with local control |
| FCA | Goods are delivered to the buyer's nominated carrier at the named place | Seller clears export; buyer clears import | Main carriage, insurance choice and import | Container and multimodal shipments |
| FOB | Goods are on board the nominated vessel | Seller clears export; buyer clears import | Ocean carriage, insurance choice and import | Direct sea or inland-waterway cargo, not routine container handoff |
| DDP | Goods arrive cleared for import and ready for unloading at the named destination | Seller handles export and import | Unloading and agreed receiving tasks | Buyers prioritizing delivered simplicity where the seller can legally import |
Worked landed-cost example
Supplier A quotes 1,000 parts at $8.00 EXW and Supplier B quotes $8.35 FCA. If collection, export handling and origin charges add $700 to the EXW shipment, Supplier A reaches $8.70 per part before main freight. Supplier B may therefore have the lower comparable origin cost despite the higher unit price. Add freight, insurance, duty, brokerage, inspection and inventory time to both offers using the same destination and assumptions.
Practical buyer scenario
Two quotes can have the same unit price but different landed outcomes if one excludes origin handling and the other hides a high DDP logistics margin. Normalize them before supplier selection.
Topic-specific review checklist
- Named Incoterms 2020 rule and exact place
- Packaging and loading responsibility
- Export declaration and origin charges
- Main freight and insurance
- Importer of record, duty and tax
- Brokerage, examination and storage risk
- Damage, shortage and claims procedure
Frequently asked questions
Is DDP always safest for the buyer?
It is simpler on paper, but poor import execution or unclear tax treatment can still create delays and liability.
Does FOB include final delivery?
No. It is a port shipment term for sea or inland-waterway transport.
Which term gives the buyer most freight control?
EXW or FCA can, but they also require more capability and coordination.
Do Incoterms define payment terms?
No. Delivery/risk rules and payment conditions are separate contract issues.
Sources and further reading
Discuss this drawing requirement with WEKO before releasing material or committing the production route.
