FOB, CIF and DDP can produce very different supplier quotes because each term allocates transport cost, risk and import responsibility differently. Comparing only the invoice price can therefore hide the real landed-cost difference.
FOB
FOB is used for sea or inland-waterway transport. The seller delivers the goods on board the vessel at the named port of shipment. The buyer then takes on the main-carriage cost and risk from that delivery point under the Incoterms framework.
CIF
CIF also applies to sea and inland-waterway transport. The seller pays the cost of carriage and specified insurance to the named destination port, but risk transfers according to the Incoterms delivery point rather than waiting until the goods arrive.
DDP
DDP can be used across transport modes and places the broadest obligation on the seller, including import clearance and payment of import duty and applicable taxes at the named destination.
Compare landed cost, not headline price
An FOB purchase can look cheap while leaving the buyer to arrange ocean freight, insurance, destination handling, customs brokerage, duties and inland delivery. CIF includes more transport cost, while DDP can bundle most delivery/import obligations into the seller’s price.
Use the Freight Cost Allocation Calculator and Freight Cost Per Unit Calculator to normalize offers into comparable unit economics.
Use the right Incoterm for the transport mode
Do not use FOB or CIF mechanically for every international shipment. ICC separates terms for any mode of transport from terms intended specifically for sea and inland waterways. See the ICC Incoterms rules overview and the current Incoterms 2020 publication for authoritative definitions.
Responsibility comparison
| Area | FOB | CIF | DDP |
|---|---|---|---|
| Main carriage paid by seller | No | Yes, to named destination port | Yes, to named destination |
| Specified insurance paid by seller | No | Yes | Depends on seller’s chosen arrangement |
| Import clearance/duties obligation | Buyer | Buyer | Seller |
| Transport mode | Sea/inland waterway | Sea/inland waterway | Any mode |
This is a planning summary, not a substitute for the official ICC rule text or a contract review. Incoterms define specific obligations and risk-transfer points, and the named place/port matters.
Normalize supplier quotes before comparing price
Suppose Supplier A quotes $18,000 FOB while Supplier B quotes $21,500 DDP. The lower FOB invoice does not automatically mean Supplier A is cheaper. Add ocean freight, insurance where needed, destination handling, brokerage, duties/taxes and inland delivery to the FOB option before comparing the two on the same landed-cost basis.
Use the Freight Cost Per Unit Calculator after normalizing each quote and the Freight Cost Allocation Calculator when several product groups share the shipment.
Incoterms do not replace the sales contract
An Incoterm allocates defined delivery, cost and risk responsibilities, but it does not by itself determine product quality, payment terms, title transfer, remedies or every customs/compliance issue. State the chosen rule and named place clearly in the contract.
Frequently asked questions
Is CIF always more expensive than FOB?
The quoted seller price is usually higher because more transport obligations are included, but the buyer’s total landed cost can be higher or lower depending on the freight arrangement and local charges.
Does DDP mean the buyer has no import-related work?
DDP places broad import obligations on the seller under the Incoterms framework, but local law, importer-of-record requirements and practical compliance can still require careful review.
Can FOB be used for air freight?
FOB is one of the Incoterms rules intended for sea and inland-waterway transport. For other modes, use an appropriate any-mode rule from the ICC framework.
Which term is best for a new importer?
There is no universal best term. Compare control, supplier capability, freight visibility, compliance responsibilities and the true landed cost.
Related guides
PackToolbox guides are built around stated formulas, practical examples and source checks for changeable carrier, freight and logistics rules. Calculators are planning aids; final requirements should be verified with the relevant carrier or service provider.