FOB, CIF and DDP are commonly used delivery terms in international purchasing, but they do not allocate the same costs, risks or responsibilities. Importers sourcing from India should understand where delivery takes place, when risk transfers, who arranges transport, who pays insurance and who is responsible for export and import formalities. A quoted price cannot be compared fairly until the Incoterm rule and named place or port are clear.
The ICC Incoterms® 2020 rules are the current edition of the ICC delivery terms. They explain seller and buyer obligations relating to delivery, risk, carriage, insurance, export and import formalities and certain costs. Incoterms do not by themselves determine ownership transfer, payment terms, product quality or all consequences of breach of contract. The parties should incorporate the selected rule into their sale contract and identify the named place precisely.
1. FOB — Free On Board
Under FOB, the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment. The seller completes the applicable export clearance and delivery obligations up to that point. Risk transfers when the goods are on board the vessel at the port of shipment. The buyer arranges and pays for the main sea carriage from that port and is generally responsible for cargo insurance if it wants cover, as well as import clearance and destination costs.
FOB is a sea and inland-waterway rule. It is not designed for every container or multimodal movement. For containerised cargo handed to a carrier at a terminal before being placed on board, FCA may be more suitable depending on the transaction and hand-off arrangement. The buyer should confirm the correct delivery point with the supplier and freight forwarder rather than using FOB as a generic synonym for “export price”.
2. CIF — Cost, Insurance and Freight
Under CIF, the seller arranges and pays for carriage and a specified level of cargo insurance to the named destination port. However, delivery and risk transfer occur when the goods are on board the vessel at the port of shipment, not when the goods arrive at the destination port. This distinction is important: the seller pays the main freight and insurance, but the buyer carries the transit risk after the risk-transfer point and may need to claim under the insurance arranged for the shipment.
Incoterms® 2020 requires a lower minimum insurance cover under CIF than under CIP. Buyers with higher-value, fragile or sensitive products should review the required cover and decide whether additional insurance is needed. CIF is a sea and inland-waterway rule. It does not automatically include destination terminal handling, import clearance, duty, tax, storage, customs brokerage or delivery to the buyer’s warehouse. The quotation should state which destination charges are included or excluded.
3. DDP — Delivered Duty Paid
Under DDP, the seller delivers the goods at the named destination place, cleared for import and ready for unloading. The seller bears the costs and risks of bringing the goods to that place, including applicable export and import clearance obligations, duties and taxes. DDP therefore places a significant responsibility on the seller. The buyer should confirm that the seller can lawfully and practically handle import formalities and taxes in the destination country.
DDP is not simply a promise to arrange a freight truck to the buyer’s door. A DDP offer may be difficult or unsuitable where the foreign seller cannot act as importer or meet local tax, registration or customs requirements. The parties should confirm who is the importer of record, who makes the customs declaration, how import VAT or sales tax is handled, whether the seller has local registrations where needed and which party receives the customs evidence.
4. Compare the main differences
| Question | FOB | CIF | DDP |
|---|---|---|---|
| Transport mode | Sea and inland waterway | Sea and inland waterway | Any mode or combination |
| Who books main carriage? | Buyer | Seller | Seller |
| Who arranges insurance? | No mandatory seller insurance under FOB | Seller arranges minimum required cover | No separate mandatory cargo policy under the rule; seller bears delivery risk |
| When does risk transfer? | When goods are on board at shipment port | When goods are on board at shipment port | At the named destination place, ready for unloading after import clearance |
| Who handles import clearance? | Buyer | Buyer | Seller |
| Are destination duties and taxes included? | No | No | Seller bears applicable import duties and taxes under the agreed DDP arrangement |
5. Do not compare quotations without the named place
“FOB India”, “CIF USA” or “DDP Europe” is incomplete. The quotation should state the exact port or destination place, such as FOB [named Indian port] Incoterms® 2020 or DDP [named warehouse address] Incoterms® 2020. A different port, terminal, warehouse or destination country changes the logistics route and cost. Confirm which version of Incoterms is used and whether any contractual modifications apply.
6. Build a landed-cost comparison
For each supplier, record the product price, packaging, origin transport, export handling, main carriage, insurance, destination terminal charges, customs brokerage, import duty, VAT or sales tax, storage, handling and final delivery as relevant. Do not add a cost twice if it is already included in the quoted term. Confirm what the supplier excludes, especially destination handling, customs, duties and final-mile delivery.
The buyer or its customs broker must verify tariff classification, country of origin, customs value, duty rate and tax treatment for the actual product and shipment. A supplier’s DDP price is not proof that customs entry and tax obligations have been handled correctly. A freight estimate is not a customs ruling.
7. Which term should an India importer choose?
FOB may suit buyers with a nominated forwarder and control over main carriage, provided the delivery point is appropriate for the cargo. CIF may suit buyers who want the supplier to arrange sea freight and minimum insurance to a named port, while retaining responsibility for import clearance and destination costs. DDP may suit a buyer seeking a delivered price only when the seller can lawfully and reliably handle destination import obligations. For containerised cargo handed to a carrier before loading on board, review whether FCA is a better fit than FOB.
8. Questions to ask before approving the quote
- Which exact Incoterm rule and edition are quoted?
- What is the named port, terminal, warehouse or destination place?
- When does risk transfer under the chosen rule?
- Who books the main carriage and who pays each origin and destination charge?
- What insurance is arranged, what is covered and who makes the claim?
- Who is responsible for export and import clearance?
- Who pays customs duties, VAT or other import taxes?
- Who is the importer of record and who receives the customs documents?
- Which charges are excluded from the quoted price?
How Vanguard Sourcing can support the supplier-side process
Within an agreed project scope, Vanguard Sourcing can coordinate supplier quotations, packing data, production milestones and shipment-readiness communication in India. The buyer and its appointed freight forwarder or customs broker remain responsible for freight booking, insurance arrangements, customs declarations, tariff advice, duties and import taxes. Vanguard Sourcing is not a customs broker or carrier.
Related resources: Incoterms explained, export and shipment coordination, landed-cost comparison and RFQ template.
Official reference
The International Chamber of Commerce publishes the official Incoterms® rules overview and the Incoterms® 2020 guidance. The full rules should be consulted when drafting a contract or resolving a delivery, cost or risk question.