Incoterms Explained: FOB, CIF, and DDP for Importers

International trade has its own language, and Incoterms are at the centre of it. If you have ever been unclear about who pays for freight, who owns the goods while they are at sea, or who handles import customs at destination — Incoterms answer all of it. Every LTF Sourcing purchase order is structured with explicit Incoterm terms to ensure no ambiguity in cost or risk allocation. The full set of 11 Incoterms rules is maintained and published by the International Chamber of Commerce (ICC) — the authoritative source for understanding how each term allocates cost and risk between buyer and seller.

FOB — Free On Board

Under FOB, the seller covers all costs and risks until the goods are loaded onto the vessel at the origin port. Once loaded, risk and cost transfer to you. You arrange your own freight, marine insurance, and import customs clearance. This gives you more control over carrier selection and freight costs — a significant advantage for high-volume importers.

CIF — Cost, Insurance & Freight

The seller arranges and pays for freight and insurance to your destination port. Risk still transfers at origin (same as FOB), but the logistics administration is handled for you. CIF looks convenient but usually carries an embedded margin — the seller's freight rates are rarely as competitive as a dedicated freight forwarder's rates.

DDP — Delivered Duty Paid

The most buyer-friendly term. The seller delivers to your specified destination with all costs — freight, insurance, customs, duties, and taxes — already covered. You simply receive the goods. For buyers importing into the United States, US Customs and Border Protection (CBP) provides detailed guidance on import duties and clearance procedures that apply regardless of which Incoterm is used. The LTF Sourcing logistics team advises on the right Incoterm selection for every shipment based on volume, category, and risk tolerance.

For most importers starting out, DDP reduces complexity. As volume grows, switching to FOB with a trusted freight partner typically saves 10–20% on landed costs.