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FOB vs DDP: which shipping terms to choose
Under FOB (free on board), the seller loads your goods onto the ship at the port of export. From there, the freight, the insurance, US customs and the duty are yours. Under DDP (delivered duty paid), the seller delivers to your door with customs cleared and the duty paid, for one price. We quote both: FOB Karachi, or DDP to your door.
- We quote FOB and DDP
- Our FOB port: Karachi
- Based on Incoterms 2020
Who does what
FOB and DDP are Incoterms rules: trade terms published by the International Chamber of Commerce (ICC).
| Compared | FOB (free on board) | DDP (delivered duty paid) |
|---|---|---|
| The seller's job ends | When the goods are on board the ship at the port of export | When the goods reach your door, cleared through customs |
| Export clearance | The seller | The seller |
| Sea freight | You book and pay | The seller |
| Insurance at sea | Up to you. The risk is yours once the goods are on board. | Up to the seller. The risk is the seller's until delivery. |
| US customs entry | You, usually through a customs broker | The seller |
| Import duty and fees | You pay them when the goods arrive | In the seller's price |
| Unloading at your door | You | You, unless agreed otherwise |
| The price you see | Lower, with freight, duty and fees still to add | Higher, but close to your landed cost |
What to add to an FOB price
To compare FOB with DDP, add up what you pay after the goods leave the port. That total is your landed cost.
- Sea freight from the port of export to a US port, booked through a freight forwarder.
- Insurance for the goods at sea, if you choose to insure them.
- Customs broker fees for filing your US customs entry.
- Import duty set by each product's code in the Harmonized Tariff Schedule of the United States.
- Customs fees such as the merchandise processing fee, and the harbor maintenance fee on sea freight.
- Delivery from the US port to your door or warehouse.
Pick by how you ship today
- Choose FOB if you already work with a freight forwarder and a customs broker, and want to control the freight.
- Choose DDP if you want one price to your door, with no customs paperwork on your side.
- Compare landed costs, not the prices on the quotes. Add the costs above to the FOB price first.
- Ask for both. We quote FOB Karachi and DDP to your door, so you can compare.
Where these rules come from
Read these before you sign a contract, and ask a licensed customs broker to confirm the duty on your products.
- Incoterms 2020. FOB and DDP are two of the trade terms published by the International Chamber of Commerce. ICC: Incoterms rules
- FOB is for sea freight. The ICC says FOB is only for sea and inland waterway transport. ICC Academy: FCA or FOB?
- Duty rates. Every product has a code and a duty rate in the Harmonized Tariff Schedule of the United States. USITC (U.S. International Trade Commission): Harmonized Tariff Schedule
- Importing. US Customs and Border Protection explains how goods enter the US, and its fees. CBP (U.S. Customs and Border Protection): basic importing and exporting
This guide explains the terms. It is not legal or customs advice.
Questions buyers ask
What does FOB mean?
FOB means free on board. The seller clears the goods for export and loads them onto the ship at the named port. From that moment, the risk and the costs pass to the buyer: the sea freight, the insurance, US customs and the duty. Our FOB port is Karachi, Pakistan.
What does DDP mean?
DDP means delivered duty paid. The seller delivers the goods to the named place, usually your warehouse, cleared through import customs with the duty paid. Of all the Incoterms rules, it gives the seller the most to do.
What is DDP shipping?
Shipping where the seller's price covers the freight, the import customs entry and the duty, so you pay nothing more before delivery. You unload the goods at your door, unless agreed otherwise.
Who pays the duty under FOB?
The buyer. The duty is paid when the goods enter the United States, usually through a customs broker who files the entry.
Who is the importer of record under DDP?
The seller, because DDP makes the seller responsible for the US customs entry and the duty. Under FOB, the buyer is usually the importer of record.
Is DDP more expensive than FOB?
The DDP price is higher because it includes the freight, the duty and the customs fees. Add those costs to the FOB price before you compare. The totals can come out close.
Is FOB only for sea freight?
Yes. Under the Incoterms 2020 rules, FOB is only for sea and inland waterway shipments. Air and courier shipments use other terms, such as FCA (free carrier), DAP (delivered at place) or DDP.
Which is better for a first order?
DDP is often simpler for a first order, because one price covers the trip to your door and the customs entry. FOB suits buyers who already ship with a freight forwarder.
How do I find the duty rate for my product?
The rate depends on the product's code in the Harmonized Tariff Schedule of the United States. The code turns on the fabric, how it is made and the type of garment. A licensed customs broker can confirm the code and the rate before you order.
Do you quote FOB or DDP?
Both. FOB Karachi, where we load your goods at the port of Karachi and you book the sea freight. Or DDP to your door, with US customs cleared and the duty paid, for one price.
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What happens next
- We reply within 24 hours with questions.
- We quote each style, FOB Karachi or DDP to your door, with the lead time.
- We make a sample. Bulk starts when you approve it.
contact@sharknits.com · +1 647 501 5424
Sharknits is a custom clothing manufacturer for brands in the US, with factories in Lahore and Sialkot and a U.S. corporate office near Chicago.