Cross-Border Incoterms: EXW vs FOB vs DDP
Understanding trade terms is critical to prevent unexpected shipping fees and customs holds. Choosing the right Incoterms ensures clear lines of liability between the manufacturer and the buyer.
Incoterms Liability & Risk Split Matrix
| Trade Term | Customs Clearance | Import Duties | Delivery Responsibility |
|---|---|---|---|
| EXW (Ex Works) | Buyer Handles All | Buyer Pays | Picked up at factory door |
| FOB (Free on Board) | Seller (Export) / Buyer (Import) | Buyer Pays | Delivered to China port ship |
| DDP (Delivered Duty Paid) | Logistics Partner Handles | Paid by Shipper | Delivered directly to customer door |
Import Taxes & Regulations: US Section 321 vs EU IOSS
Different markets have specific customs regulations that impact shipping speed:
- United States (Section 321): Parcels valued under $800 USD are duty-free (de minimis exemption). Using Type 86 digital customs clearance ensures fast processing times (under 48 hours).
- European Union (IOSS): Since the 2021 VAT reforms, all imports are subject to VAT. Dropshippers must collect VAT at checkout and submit it using an IOSS (Import One Stop Shop) registration code.
FAQ: DDP Shipping Line Queries
Q: What happens if a DDP shipment gets seized by customs?
A: Under DDP terms, the carrier or sourcing partner handles customs clearance. Professional lines provide reshipment guarantees or full value compensation.
Q: Can dropshipping packages use DDP shipping?
A: Yes. Special lines (like GPfulfillment lines) are built for small parcels, bundling clearance and local postal shipping into one unified DDP rate.
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