The short version
FOB means the supplier delivers the goods on board the vessel at the named origin port. You arrange and pay for the main carriage, insurance, destination clearance and delivery.
CIF means the supplier pays the main carriage and insurance to the destination port. You still handle import clearance, duty, VAT and the movement after the port.
DDP means the supplier is responsible for delivering cleared goods to the named destination, including import duty and taxes. That is a commercial promise, not proof that the entry was done correctly or that the tax was lawfully assessed.
Why the same number is not the same cost
A $20,000 FOB quote and a $23,000 CIF quote can describe the same goods. If you compare them as if they were both “the price”, you will double count freight or miss it entirely.
FOBtoDDP treats the value you enter as an FOB planning base. If you tell it the quote is CIF, CFR or DAP, it backs out estimated transport before adding freight and insurance back as separate lines. That keeps the total from inflating.
Where risk passes
Cost and risk are related but not identical. Under FOB, risk generally passes when goods are on board at the origin port. Under CIF, risk also passes at origin even though the supplier pays freight and insurance to destination.
Under DDP, the supplier carries more of the commercial risk, but the importer of record, product compliance and local tax registration can still sit with you. Ask who is named on the entry.
How to use the terms in a negotiation
Ask every supplier for the Incoterm and the named place. “FOB China” is incomplete; “FOB Shenzhen” or “FOB Yantian” changes the origin charges and the route.
If a supplier only quotes DDP, ask for a cost breakdown. You need to know the declared value, the duty line, the VAT treatment and who is the importer of record before you can compare it with an FOB offer.
| Term | Supplier pays | You pay | Best used when |
|---|---|---|---|
| EXW | Packing and pick-up at the factory | Everything after the factory, including export clearance | You have a strong origin forwarder |
| FOB | Export clearance and loading on board | Main freight, insurance, duty, VAT, destination costs | You want control of the route and freight |
| CFR / CIF | Main freight (and insurance under CIF) | Import clearance, duty, VAT, destination delivery | The supplier has better freight rates |
| DAP | Delivery to the named place, not cleared | Import clearance, duty, VAT | You control the import entity |
| DDP | Delivery, clearance, duty and taxes | Usually only the price you agreed | A true door-to-door price is useful |
Incoterms 2020 are a commercial allocation of costs, risks and obligations. They do not determine the customs value by themselves, and they do not replace a customs broker’s advice.
Common questions
Is FOB always the best basis for a landed cost?
It is a practical basis because it separates the goods from transport. It is not always the legal customs value basis, and it is not the only useful Incoterm.
Does DDP mean I pay no duty?
It means the supplier has agreed to bear duty and taxes commercially. The entry still has to be made correctly, and you may still have importer-of-record obligations.
Should I compare FOB and DDP totals directly?
Only after you normalise the scope. A DDP price includes costs that an FOB price excludes, so the raw numbers are not comparable.
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