Free On Board (FOB): seller delivers goods to a named port, loads on vessel. Buyer assumes cost + risk + customs from that point onward. Most common for sea freight.
Delivered Duty Paid (DDP): seller arranges delivery to buyer's door, including all import duties, VAT, customs clearance. Highest seller responsibility. Premium pricing.
When FOB makes sense: Buyer has established freight forwarder, buyer wants control over destination logistics, lower per-unit cost, buyer takes on customs risk.
When DDP makes sense: Buyer wants simplicity (single price, no surprises), buyer doesn't have customs expertise, buyer prefers all-inclusive pricing.
Cost differential: DDP adds 5-15% over FOB pricing (covers transport + customs handling).
Risk allocation: FOB places more risk on buyer (customs delays, duty surprises). DDP places risk on seller (must handle destination customs).
Corporate buyer preference: Mid-market buyers prefer DDP for simplicity. Large enterprise buyers with mature supply chain teams prefer FOB for cost optimization.
Incoterms 2020 alternatives: DAP (Delivered at Place — door-delivered, NOT including duty), CIF (Cost+Insurance+Freight to destination port, buyer handles customs).