FOB vs DDP – who pays for what?
FOB is Free On Board and DDP is Delivered Duty Paid. We compare who pays for transport, customs clearance and duty, and where risk passes to the buyer.
Key differences
Under DDP, the seller also covers the main freight, import clearance, and import duty and VAT. Under FOB, the buyer pays for this instead. The two rules also differ in the point at which risk passes to the buyer and in the mode of transport. FOB applies only to sea and inland waterway transport.
- Main carriage (freight)
- FOBBuyerDDPSeller
- Import clearance
- FOBBuyerDDPSeller
- Import duty and VAT
- FOBBuyerDDPSeller
- Risk passes
- FOBOn board the vessel at the port of loadingDDPAt the place of destination, before unloading
- Mode of transport
- FOBSea onlyDDPAny
Full cost breakdown
| Cost | FOB | DDP |
|---|---|---|
| Export clearance | Seller | Seller |
| Transport to the port or terminal | Seller | Seller |
| Loading for main carriage | Seller | Seller |
| Main carriage (freight) | Buyer | Seller |
| Insurance | No obligation | No obligation |
| Unloading at destination | Buyer | Buyer |
| Import clearance | Buyer | Seller |
| Import duty and VAT | Buyer | Seller |
| Risk passes | At the port of loading, when the goods are on board the vessel. | At the place of destination, after import clearance, when the goods are ready for unloading. |
| Mode of transport | Sea and inland waterway transport only | Any mode of transport (sea, rail, air, road) |
Notes
- Unloading at destination: if unloading costs are included in the contract of carriage concluded by the seller, the seller pays them and cannot charge them to the buyer afterwards.
What to watch for when importing from China
FOB Free On Board
A common mistake: FOB for rail or air freight. FOB applies only to sea and inland waterway transport. For rail freight from China, the right rule is FCA with the name of the terminal (e.g. “FCA Xi’an, rail terminal”), and for air freight, FCA with the name of the airport. Under FOB, the supplier pays for export clearance and the charges at the port of loading – check that they are not added to the invoice separately.
More about FOB →DDP Delivered Duty Paid
The supplier has to act as the importer in Poland: declare the goods for customs clearance and pay duty and VAT. A Chinese supplier is rarely able to do this on its own, so it uses intermediaries. Goods shipped under DDP sometimes do not go through proper import clearance – and it is then the consignee who has a problem with goods that were not legally released for free circulation. With a new supplier, DAP is the safer choice.
More about DDP →When to use FOB and when to use DDP?
- FOB – for sea freight, when the supplier delivers the goods to a port in China and handles export clearance, while your freight forwarder arranges the freight to Europe.
- DDP – when the supplier is reliable and can legally clear the goods in Poland as the importer, and you want the goods delivered with duty and VAT paid.
Buying on FOB terms? You choose the forwarder
We organise transport from China – by rail, sea or air – together with customs clearance in Poland and cargo insurance. Send us your cargo details and we will prepare a quote tailored to your shipment.
Request a quoteFAQ
What is the main difference between FOB and DDP?
Under DDP, the seller also covers the main freight, import clearance, and import duty and VAT. Under FOB, the buyer pays for this instead. The two rules also differ in the point at which risk passes to the buyer and in the mode of transport. FOB applies only to sea and inland waterway transport.
Where does risk pass to the buyer under FOB?
At the port of loading, when the goods are on board the vessel.
Where does risk pass to the buyer under DDP?
At the place of destination, after import clearance, when the goods are ready for unloading.
Can FOB and DDP be used for rail freight from China?
Only DDP. DDP works with any mode of transport, while FOB applies only to sea and inland waterway transport. That is why FOB is not used for rail freight from China.
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Incoterms® is a registered trademark of the International Chamber of Commerce (ICC). This page is an independent, simplified summary of how costs and risks are divided – it is not affiliated with or approved by the ICC. When drafting contracts, use the official text of the Incoterms® 2020 rules published by the ICC.