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The issue of foreign trade terms
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I just joinedIn this case, the client asked me to quote a DDP price, but I've only quoted FOB prices before. I want to ask what the differences between DDP and FOB are? If I accept the DDP order, what additional risks and costs will I have to bear? What should I pay attention to when quoting a price to avoid losing money?
Kevin LinYears of service：4Customer Rating：5.0
Trade Solutions ManagerStart a Chat
The fundamental difference between DDP and FOB lies in the completely different customs responsibilities and risk transfer points. Under FOB，once you deliver the goods to the ship's side at the port and complete the export declaration，your responsibilities essentially end. However，DDP requires you to handle the import clearance，pay customs duties and value-added tax in the destination country，and even bear the compliance risks of ensuring that the products meet local standards. Many novices suffer losses because they fail to calculate the tariff rates in the destination country or confirm in advance whether the products require special certifications (such as CE or FDA)，only to find out that the goods cannot be cleared or the tariff costs devour all profits when they arrive at the port. It is recommended to first check the tariff rates corresponding to the HS code in the destination country，confirm the product access requirements，and then decide whether to accept DDP. If you must accept it，it is necessary to clarify the tariff rate fluctuation clauses in the contract to avoid being passively burdened with losses due to the destination country's sudden tariff increases.
Eric ZhouYears of service：6Customer Rating：5.0
Senior Manager of Foreign Exchange & Tax RebatesStart a Chat
From a logistics operational perspective, for FOB, you only need to pay the domestic trailer fees and customs declaration fees, while the shipping costs are borne by the client. However, for DDP, you need to calculate the destination port's customs clearance fees, tariffs, value-added tax, domestic land transportation fees at the destination, and even possible storage fees. We recommend that you immediately ask the freight forwarder to provide a DDP all-inclusive quote, including all miscellaneous fees at the destination port, so that you can accurately quote the price. Additionally, under the DDP terms, you must specify a customs clearance agent at the destination port. Otherwise, the client may randomly choose an agent, and you will ultimately have to pay the exorbitant bills. Moreover, details such as how to fill in the consignee on the bill of lading and whether to provide the original bill of lading or an electronic release all affect the customs clearance efficiency and costs. It is essential to confirm the operational procedures with the freight forwarder and customs clearance agent before shipping, rather than panicking when the goods arrive.
Grace WangYears of service：10Customer Rating：5.0
Senior Foreign Trade ConsultantStart a Chat
Clients insisting on DDP usually have two reasons: first, they dislike the hassle of customs clearance and want to transfer the risk; second, they want to compare DDP prices with those of local suppliers. Don't rush to refuse immediately. You can probe by asking, "Are you preferring DDP because of the convenience of customs clearance or to compare overall costs?" If it's the former, you can propose DDU (excluding tariffs) or offer customs clearance assistance services, which not only helps clients solve problems but also doesn't tie your hands. If DDP is mandatory, you should set a high risk premium in your quotation strategy, such as adding 15-20% to the FOB cost as a risk buffer. At the same time, strive for full T/T payment or a large down payment to avoid clients delaying final payments after the goods arrive, leaving you to advance both tariffs and freight costs. Add a clause to the contract: "If additional taxes and fees are imposed due to changes in the destination country's policies, the buyer shall make up the price difference," which can transfer some risks back to the buyer.