Incoterms for vanilla: what FOB, CIF and DDP actually cost you

Two prices per kilo, and neither is comparable

You ask two suppliers for a price on the same grade. One quotes 62 USD per kilo, the other 78. The second looks expensive until you notice the first is FOB Antananarivo and the second is delivered to your warehouse. At that point you are not comparing prices, you are comparing two different products.

Incoterms are the three-letter codes that say where the seller's responsibility stops and yours begins. They are not a formality: they decide who pays the freight, who pays the duty, who insures the goods, and who is out of pocket if a container sits in a port for three weeks.

The three you will actually meet

• FOB, free on board. The seller delivers the goods loaded at the port of origin. From that moment freight, insurance, customs and inland delivery are yours. This is the most common term on vanilla, and the most transparent: you see exactly what the goods cost.
• CIF, cost insurance and freight. The seller adds sea freight and insurance to the destination port. Customs duties, clearance fees and delivery from the port are still yours. Convenient, but the freight cost is now inside a figure you cannot audit.
• DDP, delivered duty paid. The seller handles everything up to your door, duties included. One number, no logistics work, and no visibility.

You will occasionally be quoted EXW, ex works, where you collect the goods at the seller's premises. On an export from Madagascar this is rarely a good idea for a buyer, because it puts export clearance in your hands in a country where you have no presence.

What sits between an FOB price and your warehouse

This is the part buyers underestimate on a first import. Between a quoted FOB and the goods on your shelf, you will normally pay:

• International freight, air or sea, which varies enormously by season and route
• Insurance, usually a small percentage of the goods value
• Port or airport handling at arrival
• Customs clearance fees, charged by your broker per declaration
• Import duty, which on Madagascar vanilla should be zero if the origin is properly attested. Why it often is not →
• Import VAT, at your national rate, normally recoverable if you are registered
• Inland transport from the port to your address
• Storage, if anything goes wrong, and this is the one nobody budgets

On a small shipment, these fixed costs weigh heavily per kilo. On 25 kg of vanilla the clearance fee alone can move your landed cost by several percent, which is one of the practical arguments for consolidating orders rather than ordering little and often. How to size an order →

The DDP trap

DDP is attractive because it removes work. It also removes information, and it shifts a risk that the seller then has to price.

A seller quoting DDP has to guess your customs charges, your clearance fees and whether the shipment will be held for inspection. Anything they cannot predict gets a buffer. You are paying for that buffer whether or not the risk materialises, and you cannot see how big it is.

There is a second issue that matters more than it sounds. Under DDP the seller is the importer of record, which can complicate who holds the customs documentation, and therefore who can prove the origin of the goods if a question comes up later. If traceability matters in your industry, ask before accepting a DDP price.

None of which makes DDP wrong. For a first small order, or for a buyer with no forwarder, it is often the sensible choice. Just know what you are buying.

Comparing two offers properly

1. Bring both to the same Incoterm before you compare anything. Usually that means asking the DDP supplier for their FOB, or asking your forwarder to quote the freight on the FOB offer.
2. Then bring both to dry matter. Moisture changes how much vanilla you actually receive per kilo, and it moves the comparison more than freight does. How to do that conversion →
3. Then check the origin statement is included. A cheaper offer without a REX statement can cost you the full tariff on arrival, at which point it is no longer cheaper.
4. Then add your own fixed costs, which do not scale with volume. This is where a small order stops looking economical.

Do this once, properly, on a spreadsheet you keep. It takes an afternoon and it changes how you buy from then on.

Ask us for a price on your Incoterm and your destination →

Questions we get asked

What is the difference between FOB, CIF and DDP?

FOB means the price covers the goods loaded at the port of origin, and everything after that is yours. CIF adds sea freight and insurance to the destination port, but not customs or inland delivery. DDP means the seller handles everything including duties and delivery to your address. The same shipment can carry three very different prices depending on which term applies.

Which Incoterm should I ask for?

FOB if you have a freight forwarder and want control over routing and cost. DDP if you would rather have one figure and no logistics work, accepting that you cannot see what is inside it. CIF sits between the two and is common on sea freight.

Is a DDP price always more expensive?

Not necessarily, but it is always less transparent. Everything the seller cannot predict, notably customs charges and storage, gets a margin added to cover the risk. Whether that costs you more than doing it yourself depends on your volumes and on whether you already have a forwarder.