DDP vs EXW vs FOB for Electronics Imports: Who Pays VAT and Duties

The three letters that decide your real cost

Two suppliers quote the same iPhone model, same grade, same quantity, and one is a few dollars per unit cheaper. Before you call it a saving, read the three letters next to each price. An EXW price is the goods at the seller's warehouse; a DAP price adds carriage to your door; a DDP price also covers import clearance, duty and import VAT. Compared on sticker price, those are three different products.

Incoterms — the International Chamber of Commerce's trade terms, now in their 2020 edition — set who pays each leg of the journey and where the risk of loss passes to the buyer. Nothing on a wholesale phone quote moves your real cost more, or gets skim-read more often. New to comparing suppliers? Start with how to buy wholesale iPhones.

Below: what EXW, FCA/FOB, CIF/CIP, DAP and DDP each mean; who pays freight, export clearance, import clearance, duty and import VAT under each; why import VAT, not duty, is the big number on a phone import; and how to budget a shipment and brief a broker. Our own terms close the guide.

The five terms in plain language

EXW — Ex Works: the goods at the seller's door

The seller makes the goods available, packed, at its premises or another named place — and that is all. Loading, freight, insurance, import clearance, duty and import VAT are the buyer's, and formally so is export clearance, with the seller only obliged to help with information. Lowest sticker price; most cost and risk on the buyer.

FCA and FOB — handover at origin, and why air freight means FCA

Under FOB (Free On Board) the seller clears the goods for export and loads them onto the main carriage; from there, freight, risk and everything at destination are the buyer's. Strictly, FOB is a sea and inland-waterway term — risk passes on board a vessel. For air and express shipments the correct term is FCA (Free Carrier): the seller hands export-cleared goods to the buyer's nominated carrier or forwarder at a named place. The trade says "FOB Hong Kong" loosely; your contract should say FCA with a named airport or warehouse, so nobody argues later about where risk passed.

CIF and CIP — the seller pays freight and insurance, the risk is still yours

Under CIF (Cost, Insurance and Freight, sea only) and CIP (Carriage and Insurance Paid To, any mode, so the one for air), the seller pays the main carriage and buys cargo insurance for the buyer. The catch: risk still passes at origin, so a loss in transit is yours to claim on the policy the seller bought — ask for the certificate. Incoterms 2020 requires all-risks cover (Institute Cargo Clauses A) under CIP but only minimum cover (Clauses C) under CIF. Import clearance, duty and import VAT stay with the buyer.

DAP — Delivered at Place: the seller ships, you clear

The seller pays carriage to your named address and carries the risk until the goods arrive, ready for unloading. Import clearance is yours: you are the importer of record and pay duty and import VAT at destination, directly or through your broker. That is why DAP is common among VAT-registered importers — the import entry, and the VAT they may reclaim, stays in their name.

DDP — Delivered Duty Paid: the seller imports

The seller takes on everything — export clearance, freight, import clearance, duty, import VAT and delivery — and risk passes only when the goods arrive cleared for import. To do that lawfully, the seller must act as importer in the buyer's country, normally through a local customs and VAT registration or a representative. Maximum obligation for the seller, and the price has to carry all of it.

Who pays what under each term

The whole comparison in one view. "Risk passes" is the point after which a lost or damaged carton is the buyer's problem — where insurance claims live or die.

Two readings matter most. Under every term except DDP, import duty and VAT sit with the buyer — choosing EXW, FCA, CIP or DAP changes who books the freight, not who pays the import taxes. And paying for the journey is not carrying its risk: under CIF and CIP the seller pays, the buyer bears the risk.

Why import VAT is the biggest line on a phone import

Most buyers worry about duty; on phones, duty is usually the small number. Smartphones classify under HS 8517.13, and under the WTO Information Technology Agreement many major markets — the EU, the UK and the US among them — apply a zero base rate. Import VAT has no such carve-out: it is charged on the full value of the shipment at the local standard rate, often around 20% in Europe.

How the calculation works

The customs value is the goods plus freight and insurance to the border — the CIF basis used in the EU and the UK. Duty, if any, is a percentage of that value; import VAT is charged on the customs value plus the duty. Customs converts your USD invoice at the official rate for the period, so model the exchange rate too.

A worked example

Illustrative figures only, not a quote: 40 smartphones at USD 500 each, imported into a country with 0% duty on smartphones and 20% VAT.

The import VAT is more than ten times the freight and more than all the other import costs put together. What it means depends on your VAT position:

• VAT-registered, importing in your own name: the import VAT is normally recoverable, so it is cash flow rather than cost — but it has to be funded when the goods clear unless your country lets you postpone it.
• Not VAT-registered, or unable to recover it: it is a real cost and belongs in your unit economics — here, about USD 102 per phone.

Postponed and deferred VAT accounting

What separates a smooth import from trapped cash is how the VAT is paid. UK postponed VAT accounting lets a registered importer declare and reclaim import VAT on the same return, with nothing paid at the border; France has made import VAT autoliquidation mandatory for VAT-registered businesses since 2022; other EU states offer deferment or reverse-charge schemes. All of them need the import entry in your name.

United States and the Gulf

The US has no VAT: budget the duty (a zero base rate for smartphones), any origin-based tariffs — these have changed repeatedly, so confirm them with your broker at import — and formal-entry fees above USD 2,500. Origin is where a device was made, not where it shipped from. Gulf VAT is lower (5% in the UAE, 15% in Saudi Arabia), and several markets in the wider region restrict imports of used electronics — check before buying Refurbished or Asis stock, and use our grading page so your invoice describes the goods accurately.

How to budget an import and get a broker's quote

Run every supplier quote through the same skeleton so you compare like with like, whatever the Incoterm:

1. Goods value = unit price × units, at the customs exchange rate.
2. Customs value = goods value + freight + insurance to your border. Under EXW or FCA use your forwarder's actual figures; under CIP or DAP ask the seller to show freight separately on the invoice.
3. Duty = customs value × the duty rate for the tariff line — zero for smartphones in many markets, but verify it, origin-based measures included.
4. Import VAT = (customs value + duty) × your VAT rate.
5. Fees = brokerage + any disbursement fee for advancing duty and VAT + handling, storage and lithium-battery surcharges.
6. Landed cost per unit = (customs value + duty + non-recoverable VAT + fees + onward delivery) ÷ units.

Then have the number confirmed by whoever will clear the goods. Send your customs broker or forwarder:

• the Incoterm and named place from the seller's quote;
• a pro-forma invoice — model, storage, condition, quantity, unit price and currency;
• the HS code and country of origin for each line;
• carton count, weights and dimensions, and the lithium battery classification (UN 3481);
• your EORI and VAT numbers, and whether you use postponed accounting or a deferment account.

Ask for the quote in writing, including the easily missed lines: fees per entry and per extra invoice line, the disbursement fee if the broker or carrier advances duty and VAT (usually a percentage with a minimum), storage if the entry is queried, and when you will be billed. Fixed fees weigh heavily on small test orders — see our guide to low-MOQ unit economics. The broker's quote plus the supplier's is your real cost, and the only fair way to compare suppliers on different Incoterms.

Customs paperwork and the battery rules

Clean paperwork clears in hours; sloppy paperwork sits in a customs shed while your resale window closes. The core documents for an air-freighted phone shipment:

• Commercial invoice — the document customs actually reads. It needs full consignee details including your EORI/VAT/TRN number, a per-line description (model, storage, condition — new or used, stated honestly), the unit values you actually paid, the Incoterm with a named place, and country of origin. Undervaluing to shave VAT is the oldest trick in the trade and the fastest route to an audit that freezes every future shipment.
• HS codes per line — smartphones are 8517.13. Tablets, watches, earbuds and parts all classify differently, so a mixed order across the Apple catalog needs the correct code on each line, not one code stamped on the box.
• Packing list — cartons, weights, dimensions, units per carton. Boring, and the first thing a customs officer cross-checks against the invoice.
• IMEI and serial list — several markets require phone IMEIs to be registered before import or activation, and the list is your evidence in any DOA claim.
• Lithium battery declaration — phones ship as UN 3481, lithium-ion batteries contained in equipment, under IATA Packing Instruction 967, Section II: lithium battery mark on the carton, quantity caps per package, and a carrier that accepts the class from that origin — which is why the established lane is a DG-capable express network, not the cheapest consolidator of the week.

Hong Kong's role as the origin is no accident: a free port that charges no duty on phones leaving the territory, with deep air-cargo capacity to every major market. Full picture in our Hong Kong electronics wholesale guide.

Which term suits which buyer

No term is better in the abstract; each one moves work, cost and risk to a different party. A practical way to choose:

• EXW or FCA if you control the freight. You ship pallets rather than parcels, consolidate several Hong Kong sellers into one shipment, or have a forwarder and broker on retainer — and prefer to insure on your own cargo policy.
• CIP if you want the seller to buy freight and insurance but keep the import in your name. Check the certificate: the transit risk is yours even though the seller paid for the cover.
• DAP if you want delivery arranged and the import in your own name. Common among VAT-registered importers, because the import VAT stays yours to reclaim or postpone.
• DDP only if the seller can genuinely act as importer in your country. It can suit a buyer who cannot, or does not want to, be importer of record — but import VAT paid in the seller's name is normally not recoverable by you. Be wary of any delivered price too cheap to include the VAT: the usual explanation is an under-declared value, and seizures and back-assessments do not stay neatly with the seller. More warning signs in our guide to vetting a phone wholesaler.

The break-even is where your fixed cost per shipment — broker, forwarder minimums, your team's time — divided by units drops below the per-unit premium a seller charges for carrying the extra legs. Model it with the formula above.

Our own terms, plainly

For completeness, this is how Voltaxion sells; the full wording is in our Terms of Sale.

• Incoterm: EXW (Ex Works) Hong Kong is our default (Terms of Sale §7.1). A different Incoterm applies only by written agreement, with a corresponding price adjustment (§7.2).
• Shipping: we arrange DHL Express shipping for devices from Hong Kong, tracked through to proof of delivery. Accessories are held in warehouses in the USA, the EU and Hong Kong and sourced to order; allow extra lead time, and ask where they will ship from before you budget the import.
• Import VAT and duties: import VAT and any import duties in your country are always paid by you, the buyer. Budget them with the method above before you order.
• Price and payment: USD only, with a 24-hour price lock at quote time. Payment is due in full before dispatch; we do not offer credit terms.

What you can hold us to is in writing: condition grades defined on our grading page, the Apple warranty on Brand new and CPO stock, a 48-hour DOA window from proof of delivery under our warranty policy, IMEI or serial numbers on every unit, and DHL Express tracking. Buying through your own systems? Our API access exposes live stock and pricing.

Source it from live inventory

Browse live, graded stock in the catalog, then apply for verified buyer access to see distributor pricing and request quotes — in USD, EXW Hong Kong unless another Incoterm is agreed in writing, with a 24-hour price lock. Add your broker's figure for import VAT and duties, and compare suppliers on real cost.