Incoterms for Small Importers: FOB, CIF, and DDP Explained Simply

The supplier's price is rarely your full cost. What FOB, CIF and DDP actually cover, where each one can cost you, and which to ask for.

A supplier's quote is rarely what the goods will cost you. The Incoterm next to the price — FOB, CIF, DDP — decides where the supplier's responsibility ends and yours begins: who books the freight, who carries the risk, and who pays the duties. Pick the wrong one and the "cheap" quote stops being cheap.

FOB (Free On Board)

The supplier delivers the goods to the port in China, clears them for export and loads them onto the ship. Risk and cost pass to you once the goods are on board. From there you arrange and pay for ocean freight, insurance, import customs clearance, duties and delivery to your warehouse.

FOB works best when you have a forwarder you trust, and it's what most experienced importers prefer: you see every cost and control the shipment.

A note on air freight: under Incoterms 2020, FOB is meant for sea and inland waterway shipments only. For air, the correct term is usually FCA (Free Carrier), where the supplier hands the goods to your carrier or forwarder at an agreed place.

CIF (Cost, Insurance and Freight)

The supplier books and pays the ocean freight and basic insurance to your destination port. Risk still passes to you when the goods are loaded in China, even though the supplier paid the freight. You pay the destination port charges, customs clearance, duties and inland delivery.

The trap: the supplier is incentivised to book the cheapest freight it can find. The forwarder at the other end often makes up the difference with high destination charges billed to you, and you have little control over timing or routing. A CIF quote can end up costing more than FOB plus your own freight.

DDP (Delivered Duty Paid)

The supplier handles everything, including import duties and delivery to your door. To do that, the supplier (or its agent) has to act as importer of record in your country — and many factories simply aren't set up for it.

When DDP goes wrong it tends to go wrong quietly: hidden fees, goods declared under the wrong code or value, customs delays, and compliance issues that can still land on you. See our shipping methods guide for more on DDP e-commerce lines.

Side by side

Term	Who books freight	Who pays duties & import clearance	Who controls the shipment	Typical use
FOB	You	You	You	Most regular importers
CIF	Supplier	You	Shared	Simple orders
DDP	Supplier	Supplier	Supplier	Only with proven experience shipping to your country

Practical advice

On your first order, ask for both FOB and CIF quotes.
Get your own forwarder's quote for the FOB option, then compare the full landed cost, not the headline price.
Avoid DDP unless the supplier can show it has done it before for your country, with customs documents to prove it.
Confirm the named port and the Incoterm in writing on both the proforma invoice (PI) and your purchase order.
An Incoterm covers delivery and cost, not quality. It doesn't replace your product spec or quality agreement.

A clause for your purchase order

"Price is FOB Shenzhen. Buyer is responsible for freight, insurance, import customs clearance and duties from the port of loading. Risk transfers when goods are loaded on board."

Summary

FOB gives you control and transparency and suits most small importers once they have a forwarder. CIF is convenient but watch the destination charges. DDP is the easiest on paper and the riskiest in practice unless the supplier has a proven track record. Whatever you choose, write the term and port down, and compare total landed cost, not the quote.

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