DDP, DAP, and FOB are three of the most frequently used — and most frequently misunderstood — Incoterms in international trade. Choosing between them can determine whether you control your freight costs, have the right customs coverage, and who bears risk if something goes wrong.
FOB: Free on Board
Under FOB, the seller delivers goods to the port of shipment and loads them onto the nominated vessel. Risk and cost transfer to the buyer once goods are on board.
- Seller pays: Cost of goods, packing, inland haulage to port, export customs clearance, and vessel loading.
- Buyer pays: Ocean freight, insurance, import duties, customs clearance at destination, and delivery.
- Best for: Buyers who want to control freight costs and have an established freight forwarder. Note: use FCA instead of FOB for containerised shipments.
DAP: Delivered at Place
Under DAP, the seller takes responsibility for delivering goods to the named destination ready for unloading. The buyer handles import customs clearance and pays import duties.
- Seller pays: All costs of moving goods to the named destination, including export clearance, freight, and insurance.
- Buyer pays: Import customs clearance, import duties and taxes, and unloading.
- Best for: Buyers who want the seller to manage all transport logistics but want to control their own customs clearance process.
DDP: Delivered Duty Paid
DDP represents the maximum obligation on the seller. The seller is responsible for everything — export clearance, freight, import customs clearance, payment of all duties and taxes, and delivery to the buyer premises.
- Seller pays: Everything — export clearance, freight, insurance, import duties, VAT, and final delivery.
- Buyer pays: Nothing logistics-related. They pay only the agreed purchase price.
- Best for: E-commerce and B2C scenarios where the buyer cannot be expected to handle customs. Important caveat: DDP requires the seller to act as importer of record in the destination country, which may require VAT registration or fiscal representation.
Which Should You Use?
Buyers who import regularly should favour FOB or FCA to take control of freight costs. Sellers who want to offer seamless delivery to customers should consider DAP or DDP, but must ensure they can operationally deliver on those obligations.
