FOB, EXW and DDP in plain English.

Every quote from a factory carries an incoterm, and most first-time buyers read straight past it. So can the software that summarises it. That's how a "cheaper" quote turns expensive: two prices on different terms are prices for different journeys. It applies to any business buying physical goods from overseas, from a product company's first production run to a growing retailer's stock order. The three you'll meet most are EXW, FOB and DDP, and they draw the ownership line in very different places.

EXW (Ex Works)

The factory's job ends at its own door. You (or your forwarder) arrange everything from the loading dock onward: domestic trucking in China, export clearance, ocean or air freight, import clearance, delivery. Maximum control, maximum responsibility, and a quote that looks artificially cheap because it excludes the entire journey.

FOB (Free On Board)

The workhorse term. The factory delivers export-cleared goods onto the vessel at the named Chinese port; from that moment, risk and cost are yours, managed through your own freight forwarder. FOB keeps you in control of the expensive legs (you choose the forwarder, the schedule and the insurance) while leaving China-side logistics with the people best placed to do them. For most businesses importing into Australia at real volume, FOB is the sensible default to price against.

DDP (Delivered Duty Paid)

The convenience term: the seller handles everything to your nominated door, duty and GST included in the price. One number, no logistics to manage. In exchange: a premium, less visibility into what you're actually paying for each leg, and dependence on the seller's declarations being done properly in your name. Fine for samples and small runs; worth scrutiny for anything at scale.

The agent-native lens: the three letters a summary drops

When the buyer sends an assistant. Ask an AI assistant to find the cheapest of a handful of factory quotes and it may do just that: line up the unit prices, treating an EXW price and a DDP price as the same kind of number. Brief it to pull three facts from every quote first: the term, the named place, and what the price includes. Then have it list the legs each quote leaves out, so the gap gets priced rather than ignored. The same applies when you're the seller. Retailers and business customers are starting to buy through assistants of their own, and an assistant can only weigh the terms it can find. State yours as plain facts on every quote and price list, not in a footnote.

When the business runs on agents. The agent's job is consistency. It can normalise each incoming quote to the term you price against, usually FOB at a named port, adding modelled figures for the missing legs and labelling them as estimates. It can check that the quote, proforma invoice, purchase order and forwarder's booking all name the same term and place, because a quiet switch from FOB to EXW is a price change. It can route every DDP offer to a person, who asks how the seller's declarations will be made in your name. What it shouldn't do is choose the term. That turns on volume, urgency and control, so a person decides it per shipment and signs the order that fixes it.

Choosing per shipment, not by habit

The right term depends on the shipment: volume, urgency, how much visibility you want, and whether you have a forwarder you trust. Compare quotes only after normalising them to the same term, and read the named place carefully: "FOB" with the wrong port named changes the deal. Then write the term and the named place into the purchase order as distinct fields, not buried in a paragraph. As more trade documents move from paper to digital records, those two fields can travel with the order into the forwarder's booking, the broker's entry and your landed-cost model. Get them right once, and every document downstream starts from the right deal. This is exactly the ground our production & freight practice covers, recommendation and reasoning included.