The Incoterm decides where your risk, your cost and your paperwork start. Buyers usually pick one on price. That is the wrong variable — the right one is the total cost of getting the goods to your door with the least chance of a surprise.
What each term actually covers
FOB means the seller delivers the goods on board the vessel at the named port. You pay ocean freight, insurance, destination charges, duty and clearance. DDP means the seller delivers to your door with duty paid — one price, one invoice, and the seller carries the customs risk.
The worked example
A 1.2 CBM, 380 kg shipment of housewares from Ningbo to Rotterdam. Factory price FOB Ningbo is USD 4,200. Ocean LCL is USD 95 per CBM plus USD 120 documentation; destination charges are USD 210; duty at 6.5% is USD 273; VAT is recoverable; clearance and delivery are USD 240.
FOB total: 4,200 + 114 + 120 + 210 + 273 + 240 = USD 5,157, plus your time and the risk that the destination charges exceed the estimate.
A DDP quote for the same goods typically lands at USD 5,300–5,600 — a 3–8% premium for transferring the customs risk, the currency risk and the paperwork to the supplier. On a first order, that premium is usually worth paying.
When FOB wins
FOB is cheaper when you already have a forwarder with volume rates, when you import regularly enough to have a customs broker on retainer, and when you can absorb the risk of a customs query. Above roughly ten containers a year, the saving is real.
The part nobody quotes
DDP has a hidden constraint: the seller becomes the importer of record, which is not legal in every country, and the VAT treatment can be opaque. Ask who clears the goods, under which importer number, and what happens if customs revalues the shipment. If the answer is vague, the price is not the problem.
A practical rule
First order or unfamiliar product: DDP, and accept the premium. Repeat orders with stable volume: FOB with your own forwarder, once you have the data to compare. Either way, ask for the landed cost breakdown in writing — a single number is not a quotation, it is a hope.
Compare landed cost, not freight quotes. The cheapest freight is often the most expensive shipment.
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