FOB and DDP under Inco terms 2020

Difference between DDP and FOB

Delivery terms DDP and FOB

Delivered Duty Paid to a named place (DDP) and  Free On Board at named place FOB are the two of eleven delivery rules for movement of goods under Incoterms 2020.

Let us discuss here the difference between both DDP and FOB delivery terms under Inco terms

First of all, FOB rule is meant for movement of goods on waterways, as it is known as Marine restricted mode of transport whereas DDP rule may be used for movement of goods by Air, Sea or Land.

Secondly, the named place under DDP is in buyer’s side whereas under FOB, the named place is in Seller’s country. That means, in an export import trade, under FOB terms, delivery under movement of goods is taken place at buyer’s country and under DDP, delivery of goods takes place in importer’s country.

Another difference between DDP and FOB is; compared to FOB terms, higher risks and costs are involved for a seller under DDP terms for movement of good, as he is responsible for pre carriage, main carriage, main carriage, on carriage and import customs clearance and duties. 

Under FOB rules, the seller discharges his obligation on costs and risks under movement of goods when goods are placed onboard the ship at seller’s side.  However under DDP rules, the seller is responsible for movement of goods till the named place mentioned at buyer’s side.

The seller is responsible for Import clearance at buyer’s country under DDP. But under FOB terms the liability to undertake import clearance is on buyer’s shoulder.

Duties and taxes involved if any under  destination import customs clearance is under the risk and cost of seller in DDP whereas  import customs clearance taxes and duties to be paid by the buyer if delivery terms are on FOB basis.

Under a contract of carriage DDP, since the control over main carriage is with the seller, the buyer depends up on the seller to get export movement data.  However, under FOB rules, the buyer pays ocean freight and he holds the control over main carriage in turn can obtain vessel movement data from shipping carriers or his agent easily.

Under FOB terms, since the buyer controls over the ocean freight, seller does not have responsibility to release Bill of Lading.  However, the buyer and seller mutually agree and buyer arranges to instruct carrier of goods or his agent to allow seller to release BL and in turn he sends to buyer through his bank, if original BL required by the buyer.

 You may read about FOB and DDP separately in this website, you may click below to read:

FOB  Free On Board

DDP  Delivered Duty Paid

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