Incoterms 2020 Explained: FOB vs CIF vs DDP

What Are Incoterms?

Incoterms (International Commercial Terms) are pre-defined trade terms published by the International Chamber of Commerce. They clarify who pays what, who bears which risks, and where responsibility transfers between buyer and seller.

FOB (Free On Board)

Seller delivers goods on board the vessel at the port of shipment. Buyer bears freight, insurance, and destination charges. Most common for bulk exports where buyer has strong logistics network.

CIF (Cost, Insurance and Freight)

Seller pays cost of goods, insurance, and freight to the destination port. Buyer takes responsibility once goods arrive. Ideal for buyers new to importing who want turnkey pricing.

DDP (Delivered Duty Paid)

Seller handles EVERYTHING - customs clearance, duties, and delivery to buyer's door. Highest cost but lowest hassle for the buyer.

Which Should You Use?

• Large corporations with in-house logistics -> FOB
• Mid-sized importers -> CIF
• First-time buyers or small volumes -> DDP