DDP vs FOB Shipping Explained Simply (Who Pays, Risk, and When to Use It)
Avoid surprise customs charges. Here's who pays, who handles risk, and when DDP is safer.
When buying from overseas factories, many suppliers quote either DDP or FOB. Both affect cost, risk, and responsibility — and choosing the wrong one can lead to unexpected expenses or logistics problems.
What DDP and FOB Mean in Simple Terms
DDP (Delivered Duty Paid)
Seller handles almost everything until goods arrive at buyer's location. The supplier pays for freight, customs, duties, taxes, and delivers to your address. You just receive the goods.
FOB (Free On Board)
Seller handles goods until loaded on ship; buyer handles the rest. Once goods are on board, you're responsible for freight, insurance, customs, duties, and delivery.
The key difference: DDP = seller handles everything; FOB = buyer handles logistics after port.
DDP vs FOB Comparison Table
Here's a side-by-side comparison of key factors:
| Factor | DDP | FOB |
|---|---|---|
| Who handles freight | Seller | Buyer |
| Customs & duties | Seller | Buyer |
| Logistics complexity | Low | High |
| Cost transparency | Lower | Higher |
| Risk of delays | Lower for buyer | Higher for buyer |
| Control over shipping | Low | High |
| Best for beginners | Yes | No |
| Best for experienced importers | Sometimes | Yes |
This table shows the fundamental trade-off: DDP offers simplicity and risk reduction; FOB offers control and potential cost savings.
Which Is Cheaper: DDP or FOB?
The cost comparison isn't straightforward:
FOB Often Has Lower Base Product Price
Under FOB, the product price typically doesn't include shipping costs. This means the base product price may be lower than DDP. However, this is only part of the total cost.
But Buyer Pays Freight, Insurance, Duties
With FOB, you must add: ocean freight, cargo insurance, import customs fees, duties, taxes, and local delivery. These costs can add 20-40% to your product price. A $10 product might become $12-14 with all costs included.
DDP Bundles Costs → Easier But Sometimes Higher Per Unit
DDP includes all costs in the product price, so you see one total. The supplier may charge $12-13 per unit (including everything), which is often similar to FOB + all costs. However, you don't have to coordinate logistics or risk unexpected charges.
Bottom line: FOB can be cheaper for large shipments where you can optimize freight. For small orders or inexperienced importers, DDP often provides better value despite potentially higher per-unit costs.
Which Option Carries More Risk?
FOB: Buyer Handles More Risk
Under FOB, you're responsible for:
- Customs errors (can delay shipments or result in fines)
- Freight delays (you coordinate with freight forwarders)
- Unexpected duty charges (you pay all import costs)
- Logistics complications (you manage the entire import process)
Risk level: Higher, especially for first-time importers
DDP: Supplier Manages Logistics, But Less Control
Under DDP, the supplier handles:
- All customs procedures (reduces your risk)
- All shipping coordination (less complexity for you)
- All duty payments (no surprise charges)
- Delivery to your address (one less thing to manage)
Risk level: Lower, but you have less control over the process
For small businesses, DDP's risk reduction often outweighs the loss of control.
Situations Where DDP Makes Sense
Choose DDP when:
- First-time importers: You're new to international shipping and want to avoid customs complications and logistics complexity
- Small orders: On small orders, the cost savings from FOB may not justify the complexity. DDP's simplicity is worth it.
- No logistics partner: You don't have a freight forwarder or logistics company to help coordinate FOB shipping
- Testing products: When testing new products, you want to minimize variables. DDP reduces logistics risk so you can focus on product validation.
DDP is the default choice for most small businesses buying from overseas factories.
Situations Where FOB Is Better
Choose FOB when:
- Large shipments: At high volumes, handling logistics yourself can save significant money. The complexity is worth it for cost savings.
- Freight partnerships: You have relationships with freight forwarders or logistics companies that can optimize shipping costs
- Experienced importers: You understand customs procedures and can coordinate freight effectively. FOB gives you more control.
- Optimizing shipping costs: When shipping costs are a major part of your margin, FOB lets you shop for better freight rates and optimize logistics
FOB is best for buyers who have logistics experience and want cost control over simplicity.
Why Shipping Terms Matter When Buying Under MOQ
Shipping terms directly impact your risk when dealing with MOQ:
- Small buyers dealing with MOQ often prefer DDP: When you're already committing to large quantities (MOQ), you want shipping to be simple. DDP reduces variables and complications, letting you focus on product validation and sales.
- Freight cost affects total inventory exposure: Under FOB, freight and customs costs add to your total investment. A $5,000 product order might become $7,000+ with freight and duties, increasing your exposure if the product doesn't sell.
- Validating demand first reduces risk: Before committing to MOQ with either DDP or FOB shipping, validate that customers want your product. The combination of large quantities (MOQ) + shipping costs increases your total risk significantly.
Whether you choose DDP or FOB, make sure you've validated demand before committing to MOQ quantities.
FAQ About DDP vs FOB
Is DDP safer than FOB?
DDP is generally safer for small businesses and first-time importers because the seller handles all logistics, customs, and duties. This reduces the risk of customs errors, unexpected charges, and logistics complications. FOB requires the buyer to handle customs and freight, which increases risk if you lack experience. However, FOB offers more control for experienced importers.
Is FOB always cheaper?
FOB is not always cheaper. While FOB often has a lower base product price, you must add freight, insurance, customs, and duties separately. DDP bundles all costs into one price. For small orders or inexperienced importers, DDP may actually be cheaper when you factor in logistics coordination costs. FOB is typically cheaper for large shipments where you can optimize freight costs.
Who pays customs under FOB?
Under FOB, the buyer pays all customs duties, taxes, and import fees. The seller only handles export customs. Once goods reach your country's port, you're responsible for customs clearance and paying all import costs. This is different from DDP, where the seller pays all customs costs.
Which is better for small businesses?
DDP is generally better for small businesses, especially first-time importers. It reduces logistics complexity, customs risk, and unexpected costs. However, if you have logistics experience, freight partnerships, or large order volumes, FOB may offer better cost control. Most small businesses prefer DDP for simplicity and risk reduction, even if it costs slightly more.
Can I switch from DDP to FOB later?
Yes, you can negotiate different shipping terms with suppliers for future orders. Many businesses start with DDP for simplicity, then switch to FOB as they gain experience and scale. However, switching terms mid-order is usually not possible—you negotiate shipping terms before placing the order. Discuss with your supplier about using different terms for future orders.
Shipping Terms Should Match Your Risk Level
Whether you choose DDP or FOB, MOQ size and demand certainty matter just as much.
See How MOQ Pools WorksRelated Guides
What is DDP Shipping?
Complete guide to Delivered Duty Paid
What is FOB Shipping?
Complete guide to Free On Board
What is MOQ?
Complete guide to minimum order quantities
First Time Factory Buying
Common pitfalls and safer approaches
MOQ Too High?
What small brands can actually do
Inventory Risk
Understanding dead stock and overordering