Question 1

What does FOB mean in shipping?

Accepted Answer

FOB (Free On Board) means the seller delivers the goods on board the vessel at the named port of shipment, cleared for export. Risk passes to the buyer once the goods are on board, and the buyer pays the ocean freight, insurance, and import clearance. FOB applies to sea and inland waterway transport. For containerized cargo handed over at a terminal, FCA is technically the more accurate term.

Question 2

What is the difference between FOB and CIF?

Accepted Answer

Under both FOB and CIF, risk passes to the buyer at the origin port once the goods are on board. The difference is cost: with FOB the buyer arranges and pays the ocean freight and insurance, while with CIF the seller pays the ocean freight and arranges minimum insurance to the destination port. In both cases the buyer clears import and pays duties. CIF is convenient, but its insurance is only minimum cover, so many buyers top it up.

Question 3

What does DDP mean?

Accepted Answer

DDP (Delivered Duty Paid) is the maximum obligation for the seller. The seller delivers the goods to the named destination, cleared for import, with all duties and taxes paid, ready for unloading. The buyer effectively only takes delivery. DDP requires the seller to be able to clear customs in the buyer country, so it is not always practical.

Question 4

Which Incoterm should I use?

Accepted Answer

It depends on who arranges the main carriage, where risk should pass, and who clears import. If the buyer books freight, FCA (or FOB for non-containerized sea cargo) is common. If the seller books freight but risk should pass early, use a C-term such as CFR, CIF, CPT, or CIP. If the seller delivers to the buyer door, use DAP, DPU, or DDP. Use the Compare tab above to see the exact split for any two terms. This is general guidance only, not legal advice.

Question 5

Are these Incoterms 2020?

Accepted Answer

Yes. This tool reflects the ICC Incoterms 2020 rules, the current version. It covers all 11 terms: EXW, FCA, FAS, FOB, CFR, CIF, CPT, CIP, DAP, DPU, and DDP.

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