FOB vs DDP: which Incoterm should you use?
FOB (Free On Board) versus DDP (Delivered Duty Paid) — who pays freight, where risk transfers, and what each choice does to your landed cost. Last reviewed 16 July 2026.
Under FOB the buyer takes over at the port of loading and manages freight, import and duty; under DDP the seller delivers to the door with duty and VAT paid.
FOB vs DDP at a glance
| Factor | FOB — Free On Board | DDP — Delivered Duty Paid |
|---|---|---|
| Group | F — Main carriage unpaid | D — Arrival |
| Transport mode | Sea & inland waterway | Any mode |
| Who pays main freight | Buyer | Seller |
| Insurance obligation | No obligation on either party | No obligation on either party (seller carries risk to destination) |
| Risk transfers | When goods are loaded on board the vessel at the named port of shipment | At the named place of destination, cleared for import and ready for unloading |
| Export clearance | Seller | Seller |
| Import clearance | Buyer | Seller |
| Best for | Traditional sea freight where the buyer arranges and controls the main carriage | Landed-price sales where the buyer wants zero customs work — seller pays duty and import VAT |
Based on the Incoterms 2020 rules (ICC). Always confirm the exact obligations in your sales contract — as of 16 July 2026.
When to choose FOB
Choose FOB when you want to control the main carriage and clear import yourself. You take risk once goods are on board, book your own freight, and act as importer of record — keeping the customs value transparent and import VAT recoverable. It is the default for importers who run their own logistics.
When to choose DDP
Choose DDP when you want a hands-off, fully landed delivery with no customs work and no freight to arrange. The seller carries everything to your door, duty and import VAT included. It trades control and cost transparency for simplicity, and only works if the seller can act as importer of record in your country.
What it does to your landed cost
FOB and DDP sit near opposite ends of the responsibility scale, so the cost difference is large and mostly hidden. Under DDP the seller pays freight, duty and import VAT and prices them back in — usually with margin — and the VAT may not be reclaimable by you. Under FOB you pay each line directly, shop the freight, and (if VAT-registered) reclaim or postpone import VAT via PVA. For most trading importers FOB lands cheaper once the hidden DDP markups are stripped out. Compare both per unit in the calculator.
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