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FOB vs CIF vs DAP: Which Costs You More?

Comparing the three most common Incoterms by total landed cost. When each makes sense for the buyer and the seller.

Updated 2026-06-105 min read

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FOB vs CIF vs DAP: Which Costs You More?

FOB (Free On Board), CIF (Cost, Insurance, Freight), and DAP (Delivered At Place) are three of the most-used Incoterms 2020 in international trade. They differ in how much of the logistics chain the seller arranges and how the price is constructed. This guide compares them on a total-landed-cost basis with a worked example.

Brief recap of each term

FOB (Free On Board) [sea/inland waterway only]

Seller arranges export clearance and brings goods alongside the vessel at the loading port.
Seller loads the goods onto the vessel.
Risk transfers when goods are on board.
Buyer pays ocean freight, marine insurance, destination port charges, customs clearance, duty, inland transport.
Seller's responsibility ends at the loading port.

CIF (Cost, Insurance and Freight) [sea/inland waterway only]

Seller arranges export clearance, brings goods alongside, loads, pays ocean freight to destination port, buys minimum marine insurance.
Risk transfers when goods are on board at the loading port (same as FOB; cost responsibility continues to destination port).
Buyer pays destination port charges, customs clearance, duty, inland transport.
Seller's responsibility ends at the destination port (cost-wise) but risk shifts at loading port.

DAP (Delivered At Place) [any mode]

Seller arranges export clearance, all transport including freight, and delivers to the named place in the destination country.
Risk transfers at the named place (destination), unloaded.
Buyer pays customs clearance, duty, unloading at destination.
Seller's responsibility ends at delivery, before customs clearance.

Worked example: 100,000 USD product, Shanghai to Atlanta warehouse

Assume the same physical shipment under each Incoterm. Underlying costs (whoever pays):

Product (FOB price): 100,000 USD
Origin local charges, loading: 800 USD
Ocean freight: 4,200 USD
Marine insurance (ICC A): 350 USD
Destination port charges: 1,200 USD
US customs broker fee: 300 USD
Duty (MFN 5% + Section 122 15%): 20,000 USD (approximately)
MPF: 614.35 USD (capped)
HMF: 125 USD
US inland trucking (LA to Atlanta): 2,800 USD

Total economic cost: 130,389.35 USD.

Under FOB Shanghai

Buyer pays:

Seller's FOB price: 100,000
Buyer organizes everything from loading to Atlanta.
Buyer's freight rate: say 4,500 USD (slightly worse than market rate).
Buyer's insurance: 350 USD.
Destination port, broker, trucking: as listed.
Duty: 20,000 USD.
MPF + HMF: 739.35.

Total to buyer: 100,000 + 4,500 + 350 + 1,200 + 300 + 20,000 + 739.35 + 2,800 = 129,889.35 USD

Under CIF Shanghai (named destination Long Beach)

Seller's invoice includes freight and insurance:

Seller charges product + freight + insurance: 100,000 + 4,200 (seller's freight rate) + 350 (seller's insurance) = 104,550.
But seller marks up the freight as a margin: actually charges, say, 105,200.
Buyer pays: 105,200 + destination port 1,200 + broker 300 + duty 20,000 + MPF + HMF 739.35 + trucking 2,800 = 130,239.35 USD

The CIF seller earned about 650 USD on the freight markup. Buyer's net is slightly higher than FOB because the seller's rate is also slightly higher than buyer's negotiated rate.

Under DAP Atlanta

Seller delivers to Atlanta warehouse:

Seller's invoice includes everything except customs clearance, duty, and unloading at destination.
Seller's quote: say 110,500 (all-inclusive freight, terminal, trucking, with their margin).
Buyer pays: 110,500 + broker 300 + duty 20,000 + MPF + HMF 739.35 = 131,539.35 USD

The DAP seller has a larger margin opportunity because the buyer sees only the delivered price, not the components.

Under DDP Atlanta

Seller delivers and pays duty:

Seller's quote: 131,500 (all-inclusive including duty).
Buyer pays: 131,500.

The DDP seller takes on the duty calculation risk; if they get the duty wrong they eat the difference. Many sellers do not offer DDP because they cannot be the importer of record.

Comparison summary

Incoterm	Total cost to buyer	Who pays	Notes
FOB	129,889	Buyer organizes everything from loading	Maximum control, slight inefficiency if buyer freight rates are weak
CIF	130,239	Seller charges freight + insurance, buyer covers rest	Slight markup opportunity for seller
DAP	131,539	Seller delivers, buyer clears and pays duty	Larger margin opportunity for seller
DDP	131,500	Seller does everything, all-in price	Compares similar to DAP; depends on seller's duty calculation accuracy

In this example FOB wins for the buyer by about 1,600 USD. The story flips if the buyer's freight rate is worse than the seller's.

When to choose each

Choose FOB if

You have negotiated freight contracts with major carriers.
You have an established customs broker.
You want maximum visibility into freight and insurance costs.
You ship high enough volume to use carrier accounts directly.

Choose CIF if

The seller has better freight rates than you (small buyer, large seller).
You want the seller to handle export-side logistics complexity.
You are comfortable with the seller marking up freight.

Choose DAP if

You want a simple delivered price for budgeting.
The seller has the logistics capability and freight relationships.
Customs clearance and duty are still your responsibility (e.g., you have specific FTA preferences to claim).

Choose DDP if

You want one number that covers everything including duty.
The seller can act as importer of record (rare for non-resident sellers).
E-commerce B2C where the customer wants no surprises.

Hidden costs and traps

Freight markups under CIF: always ask the seller for the FOB-equivalent price to verify.
Demurrage on inbound containers: charge by US carriers if container is not returned on time. Plan for 30 to 50 USD per day.
Document fees: separate from base freight; can add 50 to 200 USD.
Royalty and assist values: must be added to dutiable value regardless of Incoterm.
Insurance gap under FOB: ocean carrier liability is limited; without buyer-purchased insurance, the buyer bears full risk of loss.

How the calculator handles Incoterms

The LandedFees calculator lets you select the Incoterm and:

Allocates costs to the seller or buyer per the Incoterm rules.
Computes the dutiable value on the correct base (FOB for US, CIF for EU/UK).
Estimates total landed cost regardless of who pays each piece.
Lets you compare side-by-side scenarios under different Incoterms.

Compare Incoterm scenarios on the LandedFees calculator.

Frequently asked questions

Is FOB always cheapest for the buyer?

Not necessarily. The total landed cost should be the same in theory under any Incoterm; the difference is who organizes and pays each step. If the buyer has better freight rates, FOB is cheaper net. If the seller has better rates, CIF can be cheaper.

Why do many sellers prefer CIF?

CIF gives the seller control over the freight booking and lets them mark up the freight as a hidden margin. Buyers should always ask for the FOB price to verify.

Is DAP the same as DDP?

No. DAP (Delivered At Place) the seller delivers but the buyer handles import clearance and pays duty. DDP the seller does both delivery and import clearance and pays duty.

Which Incoterm should an e-commerce seller use?

For B2C, DDP-equivalent is preferable for customer experience (no surprise duty bills). The seller arranges customs, duty, and last-mile delivery.

Does Incoterms affect risk transfer?

Yes. Each Incoterm specifies a different point where risk transfers from seller to buyer. Under FOB and CIF, risk transfers at the ship's rail at the loading port. Under DAP, at the named destination.

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