FOB vs EXW vs DDP: Who Pays What Under Incoterms® 2020
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The difference between FOB vs EXW vs DDP comes down to one question: where does the seller hand the goods over? Under EXW the buyer collects at the seller’s premises, under FOB risk passes once the goods are loaded on board the vessel at the port of shipment, and under DDP the seller delivers to the buyer’s country with import duties and taxes already paid.
That single choice changes what a wholesale quote really covers. Two price lists for the same Korean skincare can look very different simply because one is EXW Seoul and the other is DDP to your warehouse. Before comparing unit prices, make sure both suppliers quote on the same Incoterms® rule.
What the Incoterms® 2020 rules actually cover
The Incoterms® rules are trade terms published by the International Chamber of Commerce (ICC). The current edition, Incoterms® 2020, entered into force on 1 January 2020 and contains eleven three-letter rules.
Each rule allocates three things between seller and buyer: who arranges and pays for each leg of transport, who handles export and import customs formalities, and the point at which risk of loss or damage passes.
Write the rule, the named place and the edition together in the contract, for example “FCA Incheon, Incoterms® 2020”. The Incoterms® rules do not set the price, the payment method, when ownership passes or how disputes are settled; those belong in the sales contract.
FOB vs EXW vs DDP comparison table
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| Item | EXW (Ex Works) | FOB (Free On Board) | DDP (Delivered Duty Paid) |
|---|---|---|---|
| Place of delivery | Seller’s premises or other named place | On board the vessel nominated by the buyer at the named port of shipment | Named place of destination in the buyer’s country |
| Risk passes | When goods are placed at the buyer’s disposal, not loaded | When goods are on board the vessel | When goods are at the destination, ready for unloading |
| Loading at origin | Buyer (seller has no duty to load) | Seller | Seller |
| Export clearance | Buyer | Seller | Seller |
| Main carriage | Buyer | Buyer | Seller |
| Cargo insurance | No obligation on either party | No obligation on either party | No obligation, but the seller carries the risk so usually insures |
| Import clearance, duty and VAT | Buyer | Buyer | Seller |
| Transport modes | Any mode | Sea and inland waterway only | Any mode |
The mode split follows the U.S. International Trade Administration’s Know Your Incoterms page, and the cost allocation follows the Incoterms® 2020 cost chart published by Maersk (PDF). The binding wording is in the A1–A10 and B1–B10 articles of the ICC rulebook.
EXW: the lowest seller obligation
Ex Works means the seller makes the cartons available at its own warehouse and is done. The buyer loads the truck, files the export declaration, books international freight and clears import customs.
On paper that keeps the supplier’s price clean. In practice it causes friction for goods leaving Korea, because an export declaration must be filed with Korea Customs, and a foreign buyer rarely has the local registration or broker to do it.
Many “EXW” deals therefore quietly rely on the seller to file export paperwork anyway, which blurs who is responsible if something goes wrong. If the seller is going to load and clear for export, FCA (Free Carrier) describes that arrangement properly.
FOB: for sea cargo, and why containers usually suit FCA better
Under FOB the seller clears the goods for export and loads them on the ship the buyer has booked. Risk passes once the goods are on board; ocean freight and insurance are the buyer’s decision.
FOB is a sea and inland waterway rule. Using “FOB Incheon Airport” for air freight is a common mistake. Containers raise a second problem: they are delivered to the terminal days before they are loaded, so the seller technically still carries the risk while the box sits in a yard it no longer controls.
The ICC Academy’s article on choosing between FCA and FOB describes FCA as well suited to goods moved in containers or on pallets, with risk passing at the agreed handover point such as the container terminal. Cosmetics shipped in cartons on pallets fit that description, so ask your supplier whether FCA is possible before defaulting to FOB.
DDP: easiest for the buyer, heaviest for the seller
With DDP the seller arranges transport to your door, clears import customs and pays the import duty and VAT or GST. For a buyer new to importing it looks ideal.
The catch is that the seller must act as importer of record in your country. Depending on the market that can require a local tax registration or agent, and cosmetics often need a pre-market notification or local responsible person that a foreign seller cannot provide.
Where that is not possible, DAP (Delivered at Place) is the usual compromise: the seller delivers to your address and you clear customs and pay the taxes.
How to choose between them
- You have your own freight forwarder: FCA, or FOB for genuine port-to-port sea cargo, keeps freight cost and booking in your hands.
- You import occasionally and have no forwarder: a rule where the seller books main carriage (CIP, CIF or DAP) is simpler.
- You want a fully landed delivery: DDP works only if the seller can legally act as importer in your country; confirm that first.
Whatever you choose, the same rule and named place should appear on the quotation, the contract and the commercial invoice, and should be read together with the payment terms. Our comparison of T/T vs letter of credit covers the payment side, and air vs sea freight for cosmetics covers the transport choice.
Related reading: How to export cosmetics from Korea · T/T vs letter of credit · Air vs sea freight for cosmetics
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