EXW vs DDP: Which Incoterm Should a New Zealand Importer Use?

What is the difference between EXW and DDP?

EXW is minimum seller obligation and DDP is maximum seller obligation. Under EXW the seller makes the goods available at their own premises and stops. Under DDP the seller delivers to your named address in New Zealand, cleared for import, with duty and GST paid.

Under EXW, or Ex Works, delivery happens when the seller puts the goods at your disposal at a named place, usually their factory or warehouse. Risk passes to you at that moment. The seller is not required to load the goods and is not required to clear them for export. Loading, inland haulage at origin, export clearance, main carriage, insurance, destination handling, import clearance, duty, GST and final delivery are all yours.

Under DDP, or Delivered Duty Paid, delivery happens at the named destination in New Zealand, and risk stays with the seller for the entire journey until the goods arrive there ready for unloading. The seller pays for export clearance, all carriage, destination terminal handling, import clearance, duty, GST and inland delivery. The only thing left to you is unloading at your own site, unless the contract says otherwise.

Every other rule in the set works somewhere between those two points. If you want the full picture first, start with our plain guide to Incoterms 2020 for New Zealand importers and exporters.

Who pays for what under EXW and DDP?

EXW puts every cost after the seller's front door on the buyer. DDP puts every cost up to the buyer's front door on the seller. The table below sets the two out obligation by obligation.

Two rows in that table are the ones that break deals. Export clearance under EXW, and import entry under DDP. Both are legal formalities in a country where the party carrying the obligation has no standing.

Why is EXW a problem for a New Zealand importer?

Because EXW makes you the exporter in a country you are not registered in, and it makes loading damage your loss.

The export declaration

In most countries the export customs declaration can only be made by a locally registered entity. Buy EXW Shanghai and you need a Chinese forwarder or broker to declare the export on your behalf. It can be arranged, but you are paying for it, and the compliance exposure for a declaration made in your name sits with you, not the seller who packed the goods and knows what is in the box.

The loading gap

The seller is not obliged to load the goods onto your carrier's vehicle. If the seller's forklift driver helps out of goodwill, the loading is still at your risk. Damage during that lift is your loss, and you are arguing about it with a party who has no obligation under the rule and no incentive to settle.

The price that was never the price

EXW is usually chosen because it reads as the cheapest line on the table. It is cheap because it excludes origin haulage, terminal charges, export clearance, documentation and the cost of running logistics in a country you do not operate in. Add those back and the comparison against an FCA or CIF quote often reverses.

Why is DDP a problem for a New Zealand importer?

Because the seller has to lodge a New Zealand import entry, and an overseas seller with no presence here usually cannot.

An import entry is filed with New Zealand Customs in the name of a legally accountable importer. A commercial importer generally needs an active Customs client code, which is required for consignments valued at NZ$1,000 or more, along with the business registration and GST registration that sit behind it. An overseas seller who has never traded into New Zealand does not have any of that.

They can appoint a New Zealand customs broker or agent to act for them, and plenty of large exporters have exactly that arrangement. Plenty do not, and will still quote you DDP because it wins the order. The goods then arrive, the entry cannot be lodged, and storage and demurrage build at the freight station while both sides work out who is allowed to make the declaration.

The duty estimate the seller has to wear

Under DDP the seller has to price duty and GST at quotation, months before the goods land. If the tariff classification is disputed, or the assessed duty comes in above the estimate, the seller absorbs the difference. Sellers who have not priced that risk in tend to discover it once, then either withdraw the DDP offer or raise the price to cover it.

The question to ask before you agree

Ask the seller directly whether they can act as, or appoint, an importer of record in New Zealand, and ask for the name of the broker. If the answer is vague, you do not have a DDP deal. You have a container heading for a freight station with nobody able to clear it.

Does DDP cost you the GST input credit?

Usually yes. GST on imported goods is payable by the importer of record, and the input credit follows the importer of record. Under DDP that is the seller or their agent, not you.

A GST registered New Zealand business that imports under DAP pays the 15% GST on the landed value at the border and claims it back as an input tax credit in its next return. The GST is a timing cost, not a real one.

Under DDP the seller or their appointed agent is named on the entry, so the credit belongs to them. You paid the GST inside the DDP price, and you cannot recover it. On a container of machinery that is a material amount of money quietly converted from a recoverable tax into a permanent cost. For a business to business importer, that alone is usually enough to rule DDP out.

Does the choice change how much duty you pay?

No. Duty in New Zealand is assessed on the Customs value of the goods, broadly the transaction value on an FOB type basis, which excludes international freight and insurance. Switching between EXW and DDP does not move that base.

GST works differently. It is assessed on a landed value, broadly the Customs value plus duty plus international freight and insurance. So the freight and insurance bundled into a DDP price do form part of the GST calculation, even though they are outside the duty calculation.

Both are set by New Zealand customs and tax law, principally the Customs and Excise Act 2018 and the GST rules, and not by the Incoterm. The term decides who lodges the entry and who pays. It does not decide what is owed. Valuation and GST mechanics can change, so confirm the current position with your broker for any live shipment.

When does EXW actually make sense?

Domestic sales, and cross border deals where the buyer genuinely has its own export capability at origin.

• A domestic New Zealand sale, where there is no export declaration to make and the buyer is collecting from the seller's yard.
• A buyer with an established origin operation, its own staff or agent at the seller's location, and a reason to control every leg from the factory floor onward.
• A seller who has genuinely never exported and cannot obtain an exporter registration, where FCA is not available and the buyer accepts the origin work knowingly.

Outside those cases, EXW is a term you agree to by accident because it looked cheap.

When does DDP actually make sense?

Consumer sales and low value goods, and sellers who already run a customs agent in New Zealand.

• Business to consumer sales, where the buyer has no broker, no client code and no wish to acquire either.
• Low value goods. Since 1 December 2019, offshore suppliers selling goods with a customs value of NZ$1,000 or less to New Zealand consumers charge 15% GST at the checkout once their sales to New Zealand consumers reach NZ$60,000 in a twelve month period, and Customs does not generally collect GST or duty at the border on those consignments. The parcel is not held.
• Sellers with an established New Zealand customs agent, a proven landed cost model, and the appetite to carry duty variation risk.
• Buyers who want a single delivered price for budgeting reasons and accept that the GST credit goes elsewhere.

The pattern in that list is that DDP works where the buyer was never going to reclaim GST anyway. For a registered business, it rarely does.

What should you use instead?

FCA at the seller's premises instead of EXW, and DAP instead of DDP. Both keep the commercial shape of the deal and remove the customs problem.

FCA in place of EXW

FCA, or Free Carrier, gives you the same control of the main carriage. You still nominate the carrier and pay the freight, so the price structure you liked about EXW is intact. The difference is that the seller clears the goods for export, which is where the obligation legally belongs, and where the named place is the seller's own site the seller also loads onto your nominated vehicle with risk passing once loaded. The loading argument disappears.

DAP in place of DDP

DAP, or Delivered at Place, gives you the same delivered outcome. The seller arranges and pays for carriage to your named address and carries the risk for the whole journey. Import clearance, duty and GST stay with you, lodged by your own broker under your own client code, and the GST input credit stays with you as well. The seller avoids an obligation they may not legally be able to meet.

Both swaps come from the same test: put each obligation with the party who can legally perform it in the country where it has to be performed. That test also sits behind most of the errors in our list of common Incoterms mistakes that cost New Zealand businesses money.

How do you write the term into the contract?

Three parts every time: the rule, a specific named place, and the version year.

• FCA 12 Zhongshan Road Ningbo, INCOTERMS 2020
• DAP 45 Timber Lane Penrose Auckland, INCOTERMS 2020

A rule with no named place has no defined risk transfer point, and a rule with no year leaves a court or arbitrator to decide whether you meant the 2010 or the 2020 edition. Write all three parts on the contract, on the purchase order and on the commercial invoice, and make sure they say the same thing. Our quick reference to the 11 Incoterms 2020 rules sets out the delivery point, risk transfer and cost split for each rule if you want them side by side while you draft.