A seller in Shenzhen shipping audio accessories put two quotes for the same container on the table: DDP at USD 9,850 all-in, or FOB with his own customs broker, his own truck and his own duty. On his numbers the DDP route came out 4% dearer; on a smaller, less frequent order the same two quotes would have pointed the other way. The question is not which term is cheaper. It is where your own crossing point sits.
The companion note on this site, DDP is not always cheaper: 3 cases where FOB wins, lists the situations. This one is the arithmetic behind them: four variables, and a line you can draw on one page before the next booking.
One: who is the importer, and does the tax come back
Under DDP the provider — or the forwarder behind it — is normally the importer of record and pays duty and import VAT on its own number. If you hold your own importer number and tax registration, that VAT is money you would have recovered; inside a DDP price it is simply cost. On EUR 60,000 of goods with 20% import VAT that is EUR 12,000 that never returns, which is exactly where the 20% gap in the companion note comes from.
This variable is not a percentage, it is yes or no. If you can reclaim, the crossing point sits at almost zero: FOB or DAP from the first shipment. The rest of this note deals with the harder case, where nothing is reclaimable and the answer depends on volume and value.
Two: value density, and the duty rate hidden in the price
DDP is usually quoted per CBM or per kilo, and the price carries a duty reserve — an assumed rate that has to cover a mixed book of cargo. Your goods pay their own rate. Ask for three things in writing: the HS code used, the duty rate assumed, and the value declared. If any of the three is vague, the quote is a guess, and you are paying for the guess.
- High value per CBM, low real duty: the reserve overcharges you in proportion to value, not to volume, so FOB pulls ahead quickly.
- Low value per CBM with a minimum charge: the per-shipment minimum is spread over very little value, and DDP is usually the cheaper way to clear.
The threshold: turn the reserve into a percentage of your goods value (assumed duty minus real duty), then compare it with what it costs you to clear one shipment yourself — broker entry minimum, delivery minimum, dock appointment, and an hour of somebody's time. When the reserve exceeds that fixed cost, the term should change.
Three: how many shipments a year
Clearing yourself has fixed costs per entry, and they do not shrink because the container is bigger. Twelve shipments a year divide them by twelve; two shipments a year do not. This is the variable most often left out of the comparison, because it is invisible on a single quote: DDP does not remove those costs, it spreads them across a book of cargo and charges you a share of the average.
Four: the cost of the money in between
Under DDP the provider pays duty at import and collects from you 30 to 60 days later. That is financing, and it is priced as a percentage — so it grows with the tax, not with the freight. Under FOB you pay at entry, but you also take the input tax credit earlier and keep the float. Per container the difference is small; over a year, at high duty rates, it stops being small.
The four variables on one line
| Variable | What to ask for | Which way it moves the line |
|---|---|---|
| Tax recovery | Who is importer of record; is the VAT reclaimable | Reclaimable: own clearance from the first shipment |
| Value density vs duty reserve | HS code, assumed rate, declared value | Reserve above your fixed clearance cost: FOB |
| Shipments per year | Containers per year, not per month | Six or more: fixed costs amortise, FOB |
| Days of duty financing | Payment terms and your cost of money | Long terms and high duty: the DDP premium grows |
The arithmetic, with the numbers shown
One 40HQ, goods value USD 60,000, duty 4%, no VAT to reclaim, twelve shipments a year. The DDP quote carries a 2.5% service fee and an assumed duty rate of 5.5%.
| Per shipment | DDP | FOB, own clearance |
|---|---|---|
| Ocean freight and destination charges | included | USD 4,200 |
| Customs entry and broker file | included | USD 145 |
| Delivery and dock appointment | included | USD 760 |
| Duty at 4% | included, reserved at 5.5% | USD 2,400 |
| Service fee and coordination | USD 1,500 | none |
| Cash out | USD 9,850 | USD 7,505 |
The premium you pay for the package is about 4% of the goods value: 2.5% of service plus 1.5% of duty reserve you would not have paid. Against that, clearing yourself costs about USD 905 of fixed charges plus an hour per shipment. The crossing point is simply the goods value at which the premium equals that fixed cost:
Break-even value = fixed clearance cost / premium rate. USD 905 / 4% is about USD 22,600 per shipment.
Below roughly USD 23,000 of goods per container the package is cheaper, and should be bought. Above it — and twelve shipments a year at USD 60,000 sits well above it — you pay about USD 1,350 per container, or about USD 16,000 a year, for work you already have people to do.
Five steps before the next booking
- Ask the DDP quote for the HS code, the duty rate assumed and the value declared.
- Ask your broker for the per-entry minimum, not the rate, and for the delivery minimum with the appointment charge.
- Add them up: that is your fixed cost per shipment, F.
- Turn the premium into a rate: service fee plus (assumed duty minus real duty).
- Divide F by that rate and compare it with your average shipment value; count shipments per year, not per month.
Three things that move the line without telling you
- A seasonal order split into three smaller shipments: each one now sits below the crossing point, and DDP becomes the cheaper answer for the same annual volume.
- A tariff change, an anti-dumping case or a reclassification: the reserve inside the DDP price does not move, so the gap opens silently.
- Consolidating two lanes into full containers: value per shipment rises, fixed costs stay flat, and the term you signed last year is now the expensive one.
A note from the desk: a DDP price answers "what will this cost me"; a trade term answers "who faces customs, and who carries the papers and the risk". Two different questions, and a quotation only answers the first.
Send us the quotes you have — the DDP number and the FOB number, with the HS code and the annual volume — on WhatsApp. We will put both on the same page with the reserve and the fixed costs separated. If the lines cross, we will say so.