The difference between DDP and FOB transportation methods

In international trade, logistics transportation is a crucial link connecting buyers and sellers, and selecting appropriate transportation and delivery methods is crucial to ensure smooth transactions. DDP (Delivered Duty Paid) and FOB (Free On Board) are two common international trade delivery methods, which have significant differences in terms of responsibility, cost, and risk sharing.
1, Basic concepts of DDP and FOB
DDP, also known as "delivery after tax payment", is a delivery method in which the seller bears the greatest responsibility. In DDP, the seller is responsible for transporting the goods to the designated destination and bearing all costs and risks incurred during transportation and at the destination, including import tariffs, value-added tax, and other import related taxes. The buyer only needs to receive the goods at the designated location without any additional costs or risks.
FOB, also known as "delivery on board", is a delivery method in which the seller delivers the goods to the vessel designated by the buyer at the designated loading port, or obtains proof that the goods have been delivered to the vessel. In FOB, the seller is responsible for transporting the goods to the loading port and bearing all costs and risks prior to the loading port. Once the goods are loaded onto the vessel designated by the buyer, the risks and costs of the goods are transferred to the buyer. The buyer is responsible for paying the shipping and insurance fees from the loading port to the destination, as well as handling the import procedures and taxes for the goods.
2, The main differences between DDP and FOB
Responsibility and risk sharing
In DDP, the seller bears the greatest responsibility and risk, including transporting the goods to the destination, paying all import related taxes, and bearing the risk of loss or damage to the goods during transportation. And the buyer is relatively easy in DDP, only needing to receive the goods at the designated location.
In FOB, the seller is responsible for transporting the goods to the loading port and bearing all costs and risks prior to the loading port. Once the goods are loaded onto the vessel designated by the buyer, responsibility and risk transfer to the buyer. The buyer is responsible for paying the shipping and insurance fees, as well as handling the import procedures and taxes of the goods.
Cost bearing
In DDP, the seller is required to bear all transportation and import related expenses, including freight, insurance, customs duties, and value-added tax. This makes the total cost of DDP usually higher, as the seller needs to bear more responsibility and expenses.
In FOB, the seller only needs to bear the expenses before the loading port, including the freight for transporting the goods to the loading port and possible loading costs. The buyer is required to pay for the freight, insurance, import procedures, and taxes from the loading port to the destination. This makes the total cost of FOB relatively low, as the buyer bears more expenses.
Applicable scenarios
DDP is usually suitable for situations where the seller has strong transportation and import capabilities, or when the buyer is unfamiliar with the import process or lacks relevant experience. In DDP, the seller can provide more convenience and security for the buyer.
FOB is more suitable for situations where the buyer has strong import capabilities and experience. In FOB, the buyer can have more control over the transportation and import process of the goods, and choose suitable transportation methods and insurance companies according to their own needs.