EXW vs FOB vs CIF vs DDP — Steel Coil Buying Trade Terms Explained

When buying steel coil internationally, the quoted price is meaningless unless you understand the trade term attached to it.

A supplier may quote:

• $1,750 per tonne EXW

• $1,820 per tonne FOB

• $1,890 per tonne CIF

• $2,050 per tonne DDP

Which one is cheaper?

That depends on who pays for:

• Inland transport

• Port handling

• Export clearance

• Ocean freight

• Insurance

• Import duty

• Final delivery

These responsibilities are defined by Incoterms (International Commercial Terms).

If you misunderstand Incoterms, you risk:

• Unexpected freight cost

• Double payment of charges

• Customs delays

• Insurance gaps

• Damaged cargo disputes

This guide explains each major term clearly for steel coil buyers.

1. EXW — Ex Works

What It Means

The seller makes the goods available at their factory or warehouse.

The buyer is responsible for:

• Loading

• Inland transport

• Export clearance

• Port charges

• Ocean freight

• Insurance

• Import duty

• Final delivery

Risk transfers at seller’s premises.

When EXW Is Used

• Domestic purchases

• Experienced importers

• Buyers with freight contracts

• Buyers consolidating multiple suppliers

Risks of EXW

• Buyer must handle export paperwork

• Buyer carries all transport risk from day one

• Unexpected port charges possible

EXW offers lowest unit price — but highest buyer responsibility.

2. FOB — Free On Board

What It Means

Seller is responsible for:

• Inland transport to port

• Export clearance

• Loading onto vessel

Risk transfers once goods are on board ship.

Buyer pays:

• Ocean freight

• Insurance

• Destination port charges

• Import duty

• Inland delivery

Why FOB Is Popular in Steel Trade

FOB allows buyer to:

• Control shipping line selection

• Compare freight rates

• Manage insurance directly

Most international steel contracts use FOB pricing.

3. CIF — Cost, Insurance & Freight

What It Means

Seller pays for:

• Inland transport

• Export clearance

• Ocean freight

• Basic insurance

Risk still transfers at port of shipment — not destination.

Buyer pays:

• Destination port charges

• Import duty

• Inland transport

Important Clarification

Even though seller pays freight, risk transfers when cargo is loaded onto vessel.

If damage occurs at sea:

Buyer must claim insurance.

Many buyers misunderstand this.

4. DDP — Delivered Duty Paid

What It Means

Seller handles everything:

• Inland transport

• Export clearance

• Ocean freight

• Insurance

• Import clearance

• Duties & taxes

• Final delivery to buyer site

Risk transfers when goods arrive at buyer location.

Buyer simply receives shipment.

Why DDP Is Attractive

• No customs complexity

• No freight negotiation

• Predictable landed cost

• Ideal for first-time importers

Risks of DDP

• Higher headline price

• Less transparency in cost breakdown

• Seller controls freight choice

DDP trades convenience for price transparency.

5. Comparing EXW vs FOB vs CIF vs DDP

Term	Seller Pays	Buyer Pays	Risk Transfers
EXW	Nothing beyond factory	Everything	At seller premises
FOB	To port & vessel loading	Freight onward	On vessel
CIF	Freight + insurance	Import onward	On vessel
DDP	Everything	Nothing	At delivery site

Understanding risk transfer is critical.

6. Steel Coil Specific Considerations

Steel coil is:

• Heavy

• High-value

• Sensitive to moisture

• Subject to port damage

Improper understanding of trade term may lead to:

• Rust claims

• Handling damage disputes

• Insurance rejection

Clear documentation is essential.

7. Freight Volatility & Incoterms

Ocean freight rates fluctuate.

Under:

• FOB → Buyer exposed to freight volatility.
• CIF → Seller exposed (but may build buffer into price).
• DDP → Seller carries all volatility risk.

Market timing affects which term is best.

8. Insurance Gaps

Under FOB:

Buyer must arrange insurance.

Under CIF:

Seller provides minimum insurance.

Minimum coverage may not cover full loss.

Buyers may want to upgrade insurance independently.

Steel cargo damage can be costly.

9. Import Duties & Taxes

Under:

EXW / FOB / CIF → Buyer pays import duties.

Under DDP → Seller pays duties.

However:

Seller must understand local customs rules.

Incorrect duty calculation can cause delays.

10. Currency & Payment Risk

Payment terms combined with Incoterms affect risk exposure.

For example:

FOB + advance payment = buyer risk high.
DDP + partial payment on arrival = seller risk high.

Structure payment terms carefully.

11. When to Choose Each Term

Choose EXW if:

• You control logistics

• You consolidate shipments

• You want lowest base price

Choose FOB if:

• You want freight control

• You are experienced importer

Choose CIF if:

• You want simple freight handling

• You trust supplier’s shipping network

Choose DDP if:

• You want simplicity

• You are new to importing

• You want predictable landed cost

12. Common Buyer Mistakes

1. Comparing EXW price to CIF price directly

2. Not understanding risk transfer point

3. Assuming CIF means risk at destination

4. Not arranging proper insurance under FOB

5. Ignoring destination port charges

6. Not checking who pays unloading

Trade term misunderstanding causes most import disputes.

13. Example Real Comparison

Supplier A:
$1,750 per tonne EXW

Supplier B:
$1,820 per tonne FOB

Supplier C:
$1,900 per tonne CIF

Freight from EXW location:
$140 per tonne

Now compare:

• EXW: $1,750 + $140 = $1,890
• FOB: $1,820 + $80 freight = $1,900
• CIF: $1,900

Now real prices are similar.

Without adding freight, EXW looked cheapest.

14. FAQ Section

Which is cheapest?

Depends on freight and duty.

Does CIF include insurance?

Yes, basic coverage.

Does risk transfer at destination under CIF?

No — at shipment port.

Is DDP safest for buyer?

Yes, but often more expensive.

Should small factories use FOB?

If experienced, yes.

Can I negotiate Incoterm?

Yes.

Is EXW common in steel trade?

Yes, especially domestic.

Who pays duty under CIF?

Buyer.

Who arranges freight under FOB?

Buyer.

Is DDP good for new importers?

Yes.

15. Conclusion

Incoterms define:

• Cost
• Responsibility
• Risk

EXW gives lowest base price but highest buyer responsibility.

FOB balances control and cost.

CIF simplifies freight but not risk.

DDP provides simplicity at higher headline price.

Professional coil buyers compare total landed cost — not just mill price.

Understanding Incoterms protects your margin and your shipment.