DDP vs FOB vs CIF: which shipping term should you choose?

Your shipping term decides who pays for what, who carries the risk at each stage and who does the work. Choosing between DDP, FOB and CIF changes your total landed cost, your exposure and how much effort you put in. In short: DDP is the most convenient, FOB gives you the most control and CIF sits in between.

In short

• DDP: the seller handles shipping, customs and duties. Least work for you.
• FOB: you take charge once the goods are on the ship. Most control.
• CIF: the seller pays freight and insurance to your port; you handle customs and delivery from there.
• DDP puts all costs in the price up front. FOB and CIF can have extra fees after shipping.
• New buyers often prefer DDP or CIF for simplicity, and more experienced ones choose FOB for control.

What are Incoterms?

Incoterms (International Commercial Terms) are rules created by the International Chamber of Commerce (ICC) that define who does what in international trade. Incoterms 2020 is the current version. They give buyers and sellers a standard way to say who handles transport, costs and risks at each stage, which avoids misunderstandings and disputes.

What each term means

DDP: Delivered Duty Paid

The seller does almost everything: delivers the goods to your named place, pays all transport, handles export and import customs and pays duties and taxes. The seller carries the risk until the goods are delivered, and you only unload. (The seller isn't required to buy insurance under DDP, but they carry the risk until delivery.)

FOB: Free On Board

The seller delivers the goods and loads them on the ship you choose at the named port, and handles export clearance. After that, you take over: you pay for the sea freight, insurance if you want it, import customs, taxes and delivery. Risk passes to you once the goods are on board. You pick the vessel and the carrier.

CIF: Cost, Insurance and Freight

The seller loads the goods on the ship, pays for freight and insurance to your destination port, and gives you the documents you need to collect the goods. Risk still passes to you once the goods are on board, even though the seller paid for the voyage. You handle import customs, taxes, unloading and delivery from the port.

Term	Costs	Risk	Who does the work
DDP	Seller pays all, including shipping, customs, duties	Seller until delivery	Seller handles logistics and customs
CIF	Seller pays freight and insurance to your port	Buyer once goods are on board	You handle customs and delivery from the port
FOB	Seller pays up to loading on board	Buyer once goods are on board	You handle everything after loading

A note on EXW. Under Ex Works, the seller only makes the goods available at their premises, and you do all the work and pay all costs from there. It's the simplest for the seller and the hardest for you: best for experienced buyers with a strong logistics team.

Who pays what (indicative)

Cost line	FOB	CIF	DDP
Goods value	Buyer	Buyer	Buyer (in the price)
Origin charges and export customs	Seller	Seller	Seller
Ocean freight	Buyer	Seller	Seller
Cargo insurance	Buyer (optional)	Seller	Seller or buyer, per agreement
Import customs entry	Buyer	Buyer	Seller
Duties and import fees	Buyer	Buyer	Seller
Port fees and delivery to your door	Buyer	Buyer	Seller

DDP in practice

You send your request with product details, a manager discusses the logistics with you and you get a clear freight cost, optionally with services like insurance. The seller collects the cargo from the supplier in China, handles export clearance, ships it, clears it for import and delivers it to your warehouse. Make sure your commercial invoice and packing list match the cargo to avoid delays.

Pros: cost transparency (you see everything up front), simplified logistics, less paperwork, cost certainty and a faster time to market.

Cons: less control over the import process and shipping method, a possibly higher total cost than FOB or CIF, less visibility into each step and harder cost comparison with other terms.

Use DDP for cross-border ecommerce, overseas wholesalers, high-tax goods and new buyers who want a fixed price and reliable delivery. If you want more control, FOB or CIF may fit better.

FOB in practice

You must have a commercial invoice, packing list and bill of lading, and work with a freight forwarder for customs clearance. Your choice of term changes your costs and responsibilities.

Pros: control over the carrier, insurance and route; you can manage costs and build relationships with logistics providers; works well for large orders and growing businesses.

Cons: more to manage (ocean transit, insurance, customs), higher upfront cost pressure, more chance of disputes about the condition of goods in transit and you must manage unloading at the port.

Use FOB when you want control and have some shipping experience. It's a safe default that avoids confusion with suppliers, works well with a sourcing agent and scales well as you grow.

CIF in practice

The seller packs the goods, gets them to the port, loads them, arranges sea shipping and gives you the customs papers. You pay the freight cost the seller quotes, take the risk once the goods are on board and finish import customs when they arrive.

Pros: one quote and one invoice with all costs, insurance included, predictable freight and insurance costs and you can focus on your business.

Cons and risks:

• Loss or damage after loading. The seller buys the insurance, but you carry the risk, and basic cover (the minimum) may not include theft or breakage.
• Claims are your job, even though the seller buys the insurance, and carrier liability limits may pay less than your cargo is worth.
• Destination surprises. The seller's route choices can bring unexpected fees.
• Documents and customs valuation. Mistakes can cause delays or fines, and CIF puts freight and insurance in the customs value, which can raise duties.
• Rollover, transshipment and general average, plus last-minute route changes from world events.
• Containers: under Incoterms 2020, FOB and CIF are meant for sea and inland waterway transport. For container cargo, FCA and CIP are usually the better fit.

Use CIF if you want the seller to handle shipping and insurance to your port and you're new to global trade, but you give up some control over costs, especially customs and local fees. Many experts consider FOB better if you want more control.

How to choose

• Cost: DDP covers all costs up front. CIF includes freight and insurance but not customs and delivery. FOB lets you control costs after loading.
• Control and responsibility: DDP minimal, FOB high, CIF moderate.
• Risk and insurance: under DDP the seller carries the risk until delivery. Under FOB and CIF, you carry it once goods are on board, so check that the insurance covers everything you need.
• Convenience: DDP is the easiest; CIF is easy if you want the seller to manage the sea leg; FOB suits people who want to manage shipping and save money.

Look at your shipment size, your experience and your budget, and for complex shipments talk to a logistics expert.

FAQ

What does Ex Works mean?

The seller makes the goods available at their own place. You collect them and handle every step of shipping and pay all costs from the seller's door. Full control, full responsibility.

How does transfer of risk work?

It marks the point where you become responsible for the goods. Under EXW it's at the seller's warehouse; under FOB and CIF once goods are on board the vessel; under DDP at the delivery place. Always check when it happens.

When should I choose Ex Works?

When you want to manage every part of shipping and have strong logistics experience. You can save money by picking your own carriers, but small businesses often avoid it.

Is Ex Works suitable for new importers?

Generally not: you must handle customs, shipping and paperwork, and mistakes cost time and money. Most new buyers start with DDP or CIF.

Can I combine Ex Works with your services?

Yes. We can verify products and prepare documents while you arrange the pickup and shipping.