If you’re VAT-registered and sourcing internationally via DDP (Delivered Duty Paid), you may be paying import VAT embedded in the supplier’s quote without being able to reclaim it — a cost blind spot many established sellers don’t revisit. This post raises a critical question: does switching to EXW (Ex Works) or FOB (Free on Board) and using a freight forwarder actually save money once VAT recovery is factored in?
The DDP Problem for VAT-Registered Sellers
- DDP pricing bakes in import VAT that you cannot reclaim, even though you’re technically paying it
- After 8+ years of sourcing, many sellers default to supplier-arranged DDP simply because it’s familiar or previous freight forwarder quotes looked worse
- The hidden VAT cost may not be obvious until you compare it against an EXW structure where you handle imports yourself and can claim the VAT back
Alternative Incoterm Strategies
- EXW (Ex Works): You control everything from the factory gate onward — full visibility of landed cost components, and you reclaim import VAT as input tax
- FOB (Free on Board): Supplier delivers to port; you arrange shipping and import — a middle ground that can work well with a reliable freight forwarder
- Both require vetting and managing a freight forwarder, which adds complexity but can unlock substantial margin recovery
Practical Next Steps
- Request EXW and FOB quotes from new suppliers alongside their DDP offer — compare apples-to-apples including VAT treatment
- Identify a freight forwarder with strong track record on compliance and cost (Reddit and seller communities are common vetting sources)
- Run the math: supplier’s DDP vs. your own EXW + forwarder + shipping + import VAT reclaimed
How Squatio helps
When you’re evaluating potential new suppliers and product lines, Prospect (Product Database) helps you quickly identify and compare sourcing opportunities so you can test cost structures in your best-performing categories first. Once you lock in an incoterm strategy with a forwarder, you’ll want to monitor how landing cost changes affect your pricing power — and that’s where Squatio Optimize (PPC intelligence) keeps you aligned on competitive positioning as your unit economics shift.
What incoterms are you using now, and has switching from DDP actually delivered the savings you expected, or did hidden complications (customs, delays, forwarder fees) eat into the margin gain?
Source: Reddit