FOB vs CIF vs DDP — which Incoterm protects a new importer?

Incoterms (International Commercial Terms) are the legal shorthand that decides — at every point in the shipment chain — who pays, who insures, and who handles customs. The three you'll see most often as a small importer are FOB, CIF, and DDP.

FOB (Free On Board)

The seller delivers the goods to the export port and loads them onto the vessel. From that moment, you own them and you pay everything: ocean freight, marine insurance, destination port handling, customs duty, last-mile delivery.

• You control freight forwarder selection — usually saves 10–25% vs CIF
• You bear all risk the moment goods cross the ship's rail
• Best for: importers with a trusted forwarder and ~$5K+ orders

CIF (Cost Insurance Freight)

The seller pays freight and minimum insurance to the destination port. After the port, you take over: customs clearance, duty, last-mile.

• Convenient — one quote covers ocean cost + minimum insurance
• You overpay ~10–25% on freight (the seller marks it up)
• Insurance is minimum (110% of CIF value) — buy your own marine cargo policy if shipment > $10K
• Best for: first-time importers who don't yet have a forwarder relationship

DDP (Delivered Duty Paid)

The seller handles everything — freight, insurance, customs clearance, duty, delivery to your door. You just receive the box.

• Most expensive — sellers add 30–50% margin on the logistics package
• Zero operational risk for you
• Customs valuation can be undervalued by the seller (their margin trick) — your country's customs may audit and bill the difference
• Best for: very small orders, samples, or first ever import where you have no forwarder

Quick decision tree

• First import, < $2K, want zero hassle → DDP
• First import, $2–10K, want to learn → CIF
• Recurring imports, $5K+ orders → FOB (saves the most)

What to never do

• Accept "EXW" (Ex Works) on your first import. EXW puts even export-side trucking and export customs on you in a country where you have zero contacts. Common scam: cheap EXW quote → seller pockets the savings → you pay 2× to extract goods from the supplier's warehouse.

Run the math on each Incoterm at /en/calculator/b2b-margin-calculator/ — toggle freight cost and watch landed cost swing.