DDP vs FOB vs EXW: Choosing the Right Incoterm for Fragrance Orders

The Incoterm you agree on with your Chinese fragrance supplier determines who pays for what, who bears the risk at each stage, and who is responsible for customs compliance. Choose incorrectly and you may face unexpected charges, insurance gaps, or customs problems that delay your candles, diffusers, or essential oils by weeks. This guide compares the four most common Incoterms used in China-to-world fragrance trade and helps you select the right one for your business.

The Four Key Incoterms Explained

EXW (Ex Works)

The supplier’s responsibility ends when goods are packed and available at their factory. You arrange and pay for everything: inland trucking, export customs, ocean freight, insurance, import customs, and final delivery.

Risk transfer: At the factory floor. Your costs beyond product price: Inland trucking ($150–$400), export customs ($50–$100), ocean freight, insurance, destination charges, import duty, delivery.

FOB (Free On Board)

The supplier delivers goods onto the vessel at the named Chinese port (e.g., FOB Shenzhen). They handle inland trucking, export customs clearance, and port charges on the origin side. You take over responsibility once cargo crosses the ship’s rail.

Risk transfer: Once loaded on the vessel at origin port. Your costs beyond product price: Ocean freight, insurance, destination port charges, import duty, inland delivery.

CIF (Cost, Insurance, and Freight)

The supplier pays ocean freight and minimum insurance to the named destination port (e.g., CIF Los Angeles). You handle import customs and onward delivery.

Risk transfer: Once loaded on the vessel at origin (same as FOB), even though the supplier pays freight to destination. Your costs beyond product price: Destination port charges, import duty, inland delivery.

DDP (Delivered Duty Paid)

The supplier handles everything door-to-door, including import customs clearance and duty payment in your country. You receive goods at your warehouse with no further logistics obligations.

Risk transfer: At your warehouse door. Your costs beyond product price: None (all included in the DDP price).

Cost Comparison: A Real Example

Assume an order of 5,000 scented candles, FOB value $15,000, shipping from Shenzhen to a warehouse in Dallas, Texas.

Cost Element	EXW	FOB	CIF	DDP
Product price	$15,000	$15,000	$15,000	$15,000
Inland trucking (China)	+$300	Included	Included	Included
Export customs (China)	+$80	Included	Included	Included
Ocean freight (20GP)	+$3,200	+$3,200	Included	Included
Insurance (0.4%)	+$60	+$60	Included (min. cover)	Included
Destination port charges	+$450	+$450	+$450	Included
US customs duty (3.2%)	+$480	+$480	+$480	Included
Customs broker fee	+$175	+$175	+$175	Included
Inland delivery (US)	+$800	+$800	+$800	Included
Total landed cost	$20,545	$20,165	$19,715	$19,500–$21,000

Note: DDP pricing varies because the supplier builds in a margin for logistics risk and may use their preferred (higher-cost) providers.

Risk Analysis by Incoterm

EXW Risks

• You must appoint a Chinese export agent to handle customs clearance. Without one, cargo cannot legally leave China.
• If goods are damaged during inland trucking to the port, the loss is yours.
• Most suitable for: buyers with established freight forwarders and China-based agents.

FOB Risks

• You control the ocean freight booking and can shop for competitive rates.
• Risk transfers at the port, so any damage during ocean transit is your claim (hence insurance is critical).
• Most suitable for: buyers with moderate import experience who want cost control.

CIF Risks

• The supplier chooses the carrier and insurance. You may receive only minimum insurance cover (Institute Cargo Clauses C — excludes many common risks like water damage).
• You have no visibility into freight costs, making it harder to benchmark.
• Risk transfers at origin despite the supplier paying freight to destination — a common source of confusion.
• Most suitable for: first-time buyers who want simplicity but can handle import customs.

DDP Risks

• You have zero logistics control. If the supplier’s agent mishandles customs, you have limited recourse.
• Some DDP suppliers under-declare values to reduce duty — this creates legal liability for you as the importer of record.
• The DDP price includes a risk premium, so it is often 5–15% higher than self-managed FOB.
• Most suitable for: very small buyers, e-commerce sellers, or those without any import infrastructure.

Recommendations by Buyer Profile

First-Time Buyer (Order under $10,000)

Recommended: DDP or CIF. You lack the volume to negotiate competitive freight rates, and the learning curve for customs clearance is steep. Accept the premium for simplicity. Ensure the supplier provides a full customs declaration in your name.

Growing Brand (Orders $10,000–$50,000)

Recommended: FOB. You have enough volume to benefit from competitive ocean freight bidding. Appoint your own freight forwarder and customs broker. You gain cost transparency and control over transit scheduling.

Established Importer (Orders above $50,000)

Recommended: FOB or EXW. You have dedicated logistics staff or a trusted 3PL. EXW gives maximum control if you have a China-based consolidation agent. FOB is simpler if you prefer the supplier to handle export formalities.

Documentation Responsibilities by Incoterm

Document	EXW	FOB	CIF	DDP
Commercial Invoice	Supplier	Supplier	Supplier	Supplier
Packing List	Supplier	Supplier	Supplier	Supplier
Export Customs Declaration	Buyer’s agent	Supplier	Supplier	Supplier
Bill of Lading	Buyer arranges	Buyer arranges	Supplier arranges	Supplier arranges
Insurance Certificate	Buyer	Buyer	Supplier (min.)	Supplier
Import Customs Entry	Buyer	Buyer	Buyer	Supplier’s agent
Certificate of Origin	Supplier	Supplier	Supplier	Supplier
MSDS/SDS	Supplier	Supplier	Supplier	Supplier

Common Pitfalls to Avoid

1. Agreeing to DDP without verifying the customs broker. Some suppliers use unlicensed agents. Confirm the broker’s license number before shipping.
2. Assuming CIF insurance is adequate. Minimum CIF cover (ICC-C) excludes theft, pilferage, water damage, and breakage. For glass candles and diffusers, negotiate ICC-A (all-risk) cover or purchase supplemental insurance.
3. FOB with an unnamed port. Always specify the exact port: “FOB Shenzhen” or “FOB Ningbo.” China has dozens of ports, and inland trucking costs vary by $200+.
4. EXW without a China export license holder. Your agent must have an export license. Without one, customs clearance is impossible.
5. Not specifying the Incoterm year. Use “FOB Shenzhen Incoterms 2020” to avoid ambiguity.

How Aromiso Supports Multiple Incoterms

As an export-oriented manufacturer, Aromiso quotes FOB as standard and offers CIF and DDP arrangements through vetted logistics partners. For buyers who prefer EXW, we coordinate with your appointed forwarder for factory pickup scheduling and export documentation handoff.

Whichever Incoterm you choose, ensure it is stated explicitly on the proforma invoice, purchase order, and commercial invoice. Consistency across all three documents prevents customs discrepancies and payment disputes.