Your supplier sent two prices. One says FOB and looks like a number you will have to add things to. The other says DDP, arrives at your warehouse, duty included, and looks like the end of the conversation.
Most first-time importers take the DDP number, and the reason is not laziness. It is that one price with no homework attached feels safer than a price that comes with a list of things you do not yet understand.
Here is the short version of FOB vs DDP. DDP buys you convenience and costs you visibility. FOB costs you work and buys you control, including control of the one number that can come back and bite you years later.
This is written for founders and brands importing into the US, not for shippers who already run a customs program. If you have not priced the full order yet, read this next to the real cost of importing from China, because the shipping term decides who pays for half of what is on that list.
What do FOB and DDP actually mean?
They are two points on the same line: how far down the journey the seller’s responsibility runs before it becomes yours.
Under FOB, short for Free On Board, the seller gets the goods onto the vessel at the named port of shipment. That is where their job ends and your risk begins. From that moment, ocean freight, insurance, customs clearance, duty, and the last mile home are yours to arrange and yours to pay.
Under DDP, short for Delivered Duty Paid, the seller carries everything. They ship it, clear it through import customs, pay the duty, and put it at your disposal at the place you named. DDP is the maximum obligation a seller can take on under the rules, which is precisely why it is priced accordingly.
One practical note that trips people up. FOB is a sea and inland waterway term. If your goods are moving by air or courier, a quote labelled FOB is being used loosely, and you should ask what the seller actually means before you rely on it.
Where the other terms sit
FOB and DDP are the two you will be offered most, but they are not the whole scale. EXW, or Ex Works, sits at the far end: the seller makes the goods available at their own door and does nothing else, which sounds cheap and rarely is. CIF puts the seller in charge of freight and insurance to the destination port, but stops short of clearance and duty.
If you remember one thing about the scale, make it this. The further right you go, the fewer decisions you make, and the fewer numbers you see.
Why does DDP feel safer than it is?
Because it converts a list of unknowns into a single number, and a single number is easy to approve. The problem is that everything the number contains is now invisible to you.
Three things disappear at once. You cannot see the markup, because freight, clearance, and duty arrive bundled with the goods and no line items. You do not choose the freight forwarder, so you have no relationship with anyone in the chain and no leverage when a container sits at the terminal. And you cannot verify the declared value of your own shipment, which is the part that matters most.
There is also a quieter cost. Under DDP you never learn what anything costs, so your second order is priced as blind as your first. Founders who ship FOB from the start build a real cost model within two or three shipments. Founders who ship DDP are still guessing a year later.
Who is actually liable if the duty is declared wrong?
You are, in most cases, and this is the part of the FOB vs DDP decision that almost nobody explains.
US law puts the obligation on the importer of record to use reasonable care when declaring the value, classification, and duty rate of imported goods. That duty sits with the importer, not with whoever filled in the paperwork on their behalf.
A foreign seller can act as importer of record, but that route narrowed sharply in June 2026. Executive Order 14411 directs CBP to bar foreign importers of record from filing informal entries, restrict their use of continuous bonds, require a minimum level of tangible US assets or bonding, and either validate them through CTPAT or require them to work through a CTPAT-validated broker.
The practical effect is that the arrangement many suppliers used to offer, where a foreign entity quietly carried the entry, is being closed. More DDP shipments will be entered under the buyer’s name and the buyer’s bond, which puts the declared value squarely back on you.
Read that again in the context of a DDP quote. The seller has a direct financial interest in the declared value being low, because duty comes out of the price they quoted you. And the exposure for getting it wrong lands on the entry, which is very often yours.
The consequences are not theoretical. Under 19 USC 1592, using materially false documents or statements to enter goods carries penalties on a three-tier scale.
Simple negligence, meaning a failure to exercise reasonable care, can be penalized at up to two times the duties that were evaded. Gross negligence reaches four times, and fraud can reach the full domestic value of the merchandise. The statute also reaches anyone who aids the false statement, not only the person who signed the entry.
Now add the 2026 context. The trade-weighted average US tariff on Chinese goods sits around 30 percent, and the $800 de minimis exemption has been indefinitely suspended for every country since 24 June 2026. The gap between an honest declaration and a convenient one is larger than it has ever been, which is exactly the environment where a very attractive DDP price deserves a question rather than a signature.
None of this means DDP is a trap or that your supplier is planning something. It means the term hands someone else a decision that you remain answerable for, and you should know that before you choose it.
So which shipping term should you use?
Use DDP when you are small, new, and buying certainty. Use FOB when the order matters enough that you need to see inside the number.
When DDP is the right call
On a genuine first test batch, DDP earns its premium. You have no customs broker, no bond, no forwarder relationship, and no idea which of the twenty line items is normal. Paying a supplier to absorb all of that so you can find out whether the product sells at all is a reasonable trade.
It also makes sense when the shipment is small enough that your time is worth more than the markup, or when you are testing a supplier you may never use again and do not want to build infrastructure around.
Even then, ask the supplier one question before you accept: what value will be declared to customs, and can you see the entry paperwork. A supplier who answers plainly is fine. A supplier who gets vague has told you something.
When FOB is the right call
Once the order is large enough that the duty line is a real number, FOB is the default for a reason. You appoint the forwarder, you see every charge, you control the declared value because your broker files your entry, and you can shop freight independently of who makes your product.
FOB is also what makes the landed cost model possible. When you hold the freight quote, the brokerage invoice, and the duty calculation separately, you finally know what your product costs to land, and you can negotiate each piece instead of one opaque total.
There is a hybrid worth knowing, and it is the approach we recommend most often. Ask for the DDP price first, purely to see the full number the supplier thinks the shipment costs. Then ship on FOB and rebuild that number yourself with your own forwarder and broker. The DDP quote becomes a benchmark rather than a decision, and the gap between the two tells you what the convenience was going to cost.
What to ask before you choose a term
Four questions, whichever way you are leaning. Ask them in writing.
- “What value will be declared to US customs, and can I see the entry documents?” If you are named as importer of record, you are answerable for that figure regardless of who typed it.
- “Who is the importer of record on this shipment, me or you?” On a DDP quote the answer should be the seller. If the answer is you, then it is not really the arrangement you think you bought.
- “Can you break the DDP price into goods, freight, clearance, and duty?” A supplier who can is showing you their working. A supplier who refuses is telling you the markup is the point.
- “What HS code are you using, and how was it chosen?” The classification drives the duty rate, the duty rate drives a third of your landed cost, and an assumed code is a liability you inherit.
What to keep from this
Three things, if you remember nothing else.
DDP buys convenience by removing your visibility, which is fine on a first test batch and expensive as a habit. The declared value is your exposure, not your supplier’s, because the reasonable care obligation and the penalty scale follow the importer of record. And the smartest move is to price DDP and ship FOB, so the convenience quote becomes a benchmark instead of a decision you cannot see inside.
Let us price the term with you
We have launched 18 brands and verified 800+ suppliers, with our own team on the ground in China. We price the shipment both ways before you commit, appoint the forwarder, confirm the classification, and keep the entry clean, so the number you approved is the number you pay and the paperwork holds up if anyone asks.
Tell us what you are shipping, and we will tell you straight which term serves you and what the other one was going to cost.
Frequently asked questions
Is there an Incoterms 2026 edition?
No. The current edition is Incoterms 2020, published by the International Chamber of Commerce and in force since 1 January 2020. Plenty of articles are titled “Incoterms 2026” to look current, but the rules they describe are the 2020 ones. If a contract or quote cites a year, check that it says 2020, since naming the wrong edition creates an argument you do not want to have later.
Who pays the duty on a DDP shipment?
The seller does, as part of the price they quoted you. That is what makes DDP the maximum obligation term. The thing to confirm separately is who is named as importer of record on the entry, because responsibility for the accuracy of the declared value follows the importer of record, not whoever paid the invoice. Since Executive Order 14411 in June 2026, foreign importers of record face tighter bonding, entry, and CTPAT requirements, so this question matters more than it used to.
Is FOB or DDP cheaper?
FOB is almost always cheaper in total, because you are paying for freight, clearance, and duty at cost rather than through a supplier’s margin. DDP is cheaper in effort, not in money. On a small first shipment that trade can be worth it. On repeat orders it stops being worth it quickly, and you have no cost data to show for it.
