In June a small-appliance seller in Shenzhen signed a twelve-month DDP rate to Los Angeles at USD 3.85 per kg, converted at 7.10. In September the forwarder asked for a three percent adjustment. The seller pointed at the contract and said the rate was fixed. The forwarder pointed at a line on page two and said the rate was fixed in dollars, not in renminbi.
Both were right. The seller had read "fixed" as "nothing moves". What moves, quietly, is the exchange rate — and on a DDP shipment almost every cost inside the quote is denominated in dollars while the seller's revenue is in renminbi.
The rule: your costs are dollar costs, your margin is a renminbi number
Ocean freight, destination charges and duty are all paid in dollars at the other end. The seller collects in renminbi and converts. A quote without an exchange clause is not a promise that nothing moves; it is a promise that the quoting side absorbs the movement — until the next rate review, where it comes back.
Three ways to write it, and what each one costs
- Locked. One rate for the year, with a two to three percent buffer built into the base. You pay for the certainty whether the currency moves or not, and it is worth it when your selling price is fixed for a season.
- Monthly reconciliation. A published benchmark on the first working day, adjustment only beyond a stated band, usually two percent. Most common, and the one that needs a statement every month.
- Dollar in, dollar out. Quote and settle in dollars, take the currency risk yourself. Clean, and only sensible if you hold dollar receivables you can net against.
The arithmetic on one shipment
Take a shipment with USD 20,000 of DDP cost inside it. At 7.10 that is RMB 142,000. At 6.85 it is RMB 137,000 — five thousand renminbi, about 3.5 percent of the cost, and on a 40HQ of small appliances roughly RMB 0.25 per kg.
That is larger than most of the freight negotiations sellers spend a month on, and it arrives without a single email.
The counter-intuitive half
Freight and currency rarely move in the same direction at the same time. When the ocean index fell about ten percent last autumn, the renminbi appreciated about three percent against the dollar in the same quarter — the two partly cancelled, and the seller who only watched the index concluded his forwarder had pocketed the difference. He had not. Half of it had gone to the currency.
What an old hand puts in the contract
- The benchmark rate and its source, with the date it is read.
- The band — two percent, three percent — and who absorbs the first slice.
- A fixed reconciliation day each month, and one page of statement.
- One sentence on shipments already sailed: the rate at booking applies, no retroactive adjustment.
- On the finance side: forward settlement, or natural hedging if there is dollar income to set against dollar cost.
| Cost block | Denominated in | Currency exposure | Can it be locked |
|---|---|---|---|
| Ocean freight | US dollars | High | Yes, monthly or annually |
| Destination charges | US dollars | High | Partly, as a fixed service fee |
| Duty and import tax | US dollars | High | No: it follows the declared value |
| Origin handling and brokerage | Renminbi | None | Not applicable |
A plain note from the desk: a DDP quote is a dollar quote wearing a renminbi price. Ask which currency it is fixed in before you compare two of them, and put the answer on the contract rather than in an email.
Before the next rate review, send us the quote, the contract page and your last three settlements on WhatsApp. We will mark which lines carry currency risk, which are already locked, and where a two percent band would have saved you money this year.