FOB vs CIF vs DDP: Incoterms 2020 for Indian exporters
The Incoterm on your quote decides which costs sit in your price and where your risk ends. Here is how the common ones compare, and which to choose.
The quick comparison
| Term | Seller pays up to | Risk passes to buyer | Best for |
|---|---|---|---|
| EXW Ex Works | Goods ready at your premises | At your premises | Rarely ideal for exports from India, since the buyer can't easily handle Indian export clearance |
| FCA Free Carrier | Handover to the buyer's carrier, export cleared | On handover | Containers and air; the modern replacement for FOB |
| FOB Free On Board | Goods on board at the port of shipment | On board, port of shipment | Bulk and break-bulk by sea; buyers with their own forwarder |
| CFR Cost and Freight | Sea freight to destination port | On board, port of shipment | Buyers who arrange their own insurance |
| CIF Cost, Insurance and Freight | Sea freight plus minimum insurance to destination port | On board, port of shipment | Buyers who want a port-to-port price by sea |
| CIP Carriage and Insurance Paid | Carriage plus all-risks insurance to the named place | On handover to the first carrier | Containers and air with insurance included |
| DAP Delivered At Place | Delivery to the named place, not unloaded | At the named place | Door delivery where the buyer clears import customs |
| DDP Delivered Duty Paid | Delivery plus import duty and taxes | At the named place | Only when you can clear and pay taxes in the buyer's country |
Four mistakes that cost Indian exporters money
1. Using FOB or CIF for containers
FOB, FAS, CFR and CIF are sea and inland waterway terms. With containers you usually hand the box to the carrier at a container freight station or inland depot, days before it is loaded, yet under FOB you still carry the risk until it is on board. FCA or CIP match what actually happens.
2. Forgetting that CIF insurance is the minimum
Under CIF, Incoterms 2020 only requires minimum cover (Institute Cargo Clauses C) for at least 110% of the contract value. CIP requires broader all-risks cover (Clauses A). If the buyer expects all-risks cover, say so in the contract.
3. Quoting DDP without knowing the taxes
Under DDP you pay the import duty and import VAT or GST. In many countries you need a local registration or an agent to do that, and getting the duty wrong comes straight out of your margin. Price it with the real duty rate first; trade deals such as the India–UK CETA can bring it to zero.
4. Not naming the place
"FOB India" is not enough. Write the port or place and the version, for example "CIF Felixstowe, Incoterms 2020", so freight and risk are clear.
Which term should you quote?
- New buyer, small order: FCA or FOB, so the buyer's forwarder handles the main freight and you avoid freight surprises.
- Buyer wants one delivered price: CIP or CIF, with freight quoted from a forwarder that week.
- Large buyer with a customs broker: DAP, which gives door delivery while the buyer handles import duty and VAT.
- Marketplace or retail buyer who insists: DDP, but only with a clear duty and tax calculation and a partner to clear goods.
Corridor Terminal's quote builder shows your price under every Incoterm at once, and the Incoterms explainer shows who pays each cost.
Common questions
What is the difference between FOB and CIF?
Under FOB the seller's job and risk end when the goods are loaded on the ship at the port of shipment; the buyer pays sea freight and insurance. Under CIF the seller also pays sea freight and minimum insurance to the destination port, but risk still passes when the goods are on board at origin.
Can I use FOB or CIF for containers?
FOB, FAS, CFR and CIF are meant for sea and inland waterway transport. For containers handed to the carrier at an inland depot or terminal, FCA, CPT or CIP fit better because the seller loses control of the goods before they are on board.
Is DDP a good idea for small exporters?
Only if you can clear customs and pay import duty and VAT in the buyer's country, usually through a local partner or registration. Otherwise mistakes in duty and tax can wipe out the margin.
How many Incoterms are there?
Incoterms 2020 has 11 rules: seven for any mode of transport and four for sea and inland waterway only.
Quote the same order on every Incoterm
Enter your cost and margin once and see EXW, FCA, FOB, CIF, CIP, DAP and DDP prices side by side.
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