Is a 36 dollar gap between FOB and DDP normal under case incoterms?

Answer: Yes. Of the 36, USD 23.05 is duty and VAT, 8 is freight and cover, and 5 is handling plus clearance, so haggling cannot move the bulk.

Can import VAT be recovered under DDP?

Answer: It is creditable after 60–90 days. With a local tax number the seller claims directly; without one the import agent claims and settles back, which is why the fee stays in the price.

Must the seller insure under FOB?

Answer: No. FOB requires no seller cover and no premium enters the quote; what the seller must control is exposure before the rail, written as its own clause.

Which DDP cost is most often missed?

Answer: Inspection and detention, at USD 0.42 per case on a 4% rate and USD 480 each. One inspected shipment in ten wipes out the margin on the batch.

Which of the 11 nodes causes the most disputes?

Answer: Node 5. FOB names the rail and DDP names the unloaded warehouse, and a case dropped during the lift falls between them, decided by the term rather than by argument.

Case Incoterms: FOB vs DDP for Cases

Quick answer: Under case incoterms the same batch quotes USD 62 FOB and USD 98 DDP, and 60% of the 36 dollar gap is import duty and VAT, not freight.

Reading the 11 nodes in case incoterms
FOB: responsibility ends at the ship's rail
DDP: responsibility ends at the buyer's warehouse
Breaking down the 36 dollar gap
Documents and four hidden costs
FAQ

1. Reading the 11 nodes in case incoterms

The batch runs 1,200 cases, USD 41 factory, USD 62 FOB or USD 98 DDP. Case incoterms cut it into 11 nodes, each answering who pays and who carries risk.

Node	FOB	DDP
1 Export declaration	Seller	Seller
2 Inland haul	Seller	Seller
3 Origin terminal handling	Seller	Seller
4 Loading on board	Seller	Seller
5 Risk transfer	Over the rail	Unloaded at destination
6 Main freight	Buyer	Seller
7 Marine cover	Buyer arranges	Seller arranges
8 Destination handling	Buyer	Seller
9 Import clearance	Buyer	Seller
10 Duty and VAT	Buyer	Seller, paid forward
11 Inland delivery	Buyer	Seller

Nodes 1 to 4 are seller work under both terms. The split begins at node 5: FOB hands the other 7 rows to the buyer, DDP keeps all 11.

Fill the rows into a quotation and half the arguments vanish, because most disputes are about an unclaimed node such as destination detention, not about unit price.

2. FOB: responsibility ends at the ship's rail

FOB puts export declaration, inland haul, terminal handling and loading on the seller, with risk passing as the cargo crosses the rail. Those four stages cost USD 21, a third of the USD 62 quote.

Case incoterms costing reference, a black hard case open on grey with velvet lid lining, ten foam compartments and coiled cables

The 21 splits into 1.5 for declaration, 5.5 for inland haul, 6 for terminal handling and 8 for loading. Loading is dearest and hardest to cut, since the lift is charged per case against 6.8 kg.

FOB does not oblige seller cover, so no premium enters the quote, and the buyer decides whether to insure. What the seller must control is exposure before the rail, which belongs in its own clause.

All 7 later nodes fall to the buyer: freight, destination handling, clearance, duty and VAT, inland delivery. FOB only looks cheapest because its bill is unfinished.

3. DDP: responsibility ends at the buyer's warehouse

DDP puts the cost and risk of all 11 nodes on the seller until unloading finishes at the buyer's warehouse. The USD 98 includes duty and VAT, both paid in cash at clearance.

VAT is recoverable after 60–90 days, once the import filing cycle closes; duty is not recoverable and enters cost directly. That is the most underestimated block in a DDP quote.

Without a local tax number the seller needs an import agent at USD 2 per case, and the agent becomes consignee of record, so title is incomplete until clearance ends.

DDP also stretches the delivery promise by 12–18 days over FOB, all clearance queue, none of it sea time. Quote that window rather than explain a breach later.

Write the end point carefully: DDP delivers when unloading finishes, so who operates the unload, and who owns a knock during it, must be spelled out.

4. Breaking down the 36 dollar gap

Of the 36 dollars between 98 and 62, only two items exceed 8: freight and cover at 8, import VAT at 14.65. The tax lines total 23.05, or 64% of the gap.

Case incoterms dispatch bench with a navy blue case open on steel racking, kraft envelopes over egg-crate foam and an unclasped latch

Item	USD per case	Share of the 36
FOB unit price	62.00	Base
Freight and cover	8.00	22%
Destination handling	3.00	8%
Clearance agent	2.00	6%
Import duty at 12%	8.40	23%
Import VAT at 18%	14.65	41%
DDP unit price	98.05	—

Only freight touches the case itself: at 6.8 kg and 0.062 m³, charged on volume, one case runs USD 6–8 by sea, and the other 28 dollars are cross-border cost.

Which term to quote rests on three numbers: batch size, destination tax rate, and whether the buyer holds an import licence. Under 200 cases the DDP fixed cost cannot spread, so FOB fits better.

The gap is not a premium. It is someone else's cash and someone else's risk.

5. Documents and four hidden costs

FOB runs on four documents: bill of lading, commercial invoice, packing list and certificate of origin. DDP adds the import declaration and the duty receipt, the one paper a buyer can audit tax against.

Documents decide whether a node is real. Whether the consignee box names agent or buyer determines who collects at destination, and a certificate coded differently from the invoice pushes duty into the higher band.

Timing matters as much. A certificate issued after sailing can move the rate from 12% to 18%, and a duty receipt collected later than 15 days after clearance leaves nothing to audit.

Hidden cost	USD per case	Trigger
Financing the VAT advance	0.35	60 day terms at 6.5%
Delayed export rebate	0.28	Filing slips, refund 45 days late
Inspection and detention	0.42	4% inspection rate, USD 480 each
FX and quote validity	0.55	45 day validity, 2.1% movement

Left out of the quote, these eat USD 1.60 per case within three months, 2.6% of a USD 62 price. The dearest is FX: 2.1% across a 45 day validity costs 0.55, more than an inspection, and appears on no invoice.

Conclusion

Choosing between FOB and DDP ends on an 11 row table, not on two unit prices. Each row carries three entries: who pays, who carries risk, which document proves it. Rows 1 to 4 match; from row 5 they split, with FOB handing risk to the buyer and 7 rows with it, while DDP keeps all 11 and pays USD 23.05 forward. Then test three conditions: batch under 200 cases, destination duty above 15%, buyer without an import licence. If one holds, quote DDP; if none does, quote FOB. A row you cannot fill is a row the contract has not settled.

This article discusses container-side specifications and design implications only, and does not cover any handling, loading or use of the contents.