FOB vs DDP — Which Incoterm Is Right for Your Imports?

What is the difference between FOB and DDP?

FOB (Free On Board) means the seller delivers goods to the
named port of shipment and loads them onto the vessel. From
that point, the buyer is responsible for freight, insurance,
import duties and delivery to their premises.

DDP (Delivered Duty Paid) means the seller takes full
responsibility for delivering goods to the buyer's named
location, covering all costs including export clearance,
freight, insurance, import duties and taxes.

What does FOB mean in practice?

Under FOB terms, as the buyer you are responsible for:
- Arranging and paying for international freight
- Arranging cargo insurance
- Paying import duties and taxes in your country
- Customs clearance in your country
- Final delivery to your warehouse

The seller is responsible for:
- Manufacturing and packaging the goods
- Export clearance in their country
- Loading goods onto the vessel at the named port

What does DDP mean in practice?

Under DDP terms, the seller handles everything. As the buyer
you simply receive the goods at your door or named delivery point.
The seller absorbs all freight, insurance, duty and tax costs
into their quoted price.

When should you use FOB?

FOB is generally better when:
- You have an established relationship with a freight forwarder
- You are importing significant volume and can negotiate
competitive freight rates
- You want full visibility and control over your supply chain
- You are importing from a country where DDP is less common

When should you use DDP?

DDP is generally better when:
- You are new to importing and want simplicity
- You are placing a small or trial order
- You want a single all-in price with no hidden costs
- The supplier has strong logistics capability

Which incoterm gives you the lowest landed cost?

FOB typically gives experienced importers a lower total landed
cost because they can negotiate freight rates independently.
DDP is more convenient but the seller builds their logistics
margin into the price.

What other incoterms should importers know?

Beyond FOB and DDP, the most commonly used incoterms for
importers are:

- EXW (Ex Works): Buyer collects from seller's factory.
Maximum buyer responsibility.
- CIF (Cost Insurance Freight): Seller pays freight and
insurance to destination port. Buyer handles import clearance.
- DAP (Delivered at Place): Similar to DDP but buyer handles
import duties and taxes.

FAQ

Q: Can I negotiate incoterms with a supplier?
A: Yes. Most suppliers will offer multiple incoterm options.
FOB is the most commonly negotiated starting point.

Q: What incoterm should a first-time importer use?
A: DDP offers the simplest experience for first-time importers
as the supplier handles all logistics and duty costs.

Q: Do incoterms affect the price I pay?
A: Yes. The same goods quoted under DDP will cost more than
under FOB because the seller includes their logistics costs
in the DDP price.