FOB, CIF or DDP? Choosing Incoterms for Food Imports from Vietnam

Which Incoterm fits which buyer?

The Incoterm decides three things: where the seller’s delivery obligation ends, who pays which part of the journey, and at what point the risk of loss or damage passes to the buyer. For food shipped from Vietnam, the five rules below cover most quotations.

We quote FOB Cat Lai, CFR, CIF and CIP from Vietnam. DDP is available for selected products and destinations through our EU DDP route and our US DDP-oriented supply.

Under CIF, who carries the risk while the container is at sea?

The buyer does. It is a common misunderstanding in food purchasing. Under CFR and CIF the seller pays the freight, but the risk passes in Vietnam, when the goods are loaded on board. If a reefer fails mid-voyage or cartons are crushed at transhipment, the claim is the buyer’s to make: under CIF against the policy the seller bought, under CFR against the buyer’s own cover.

That is why the insurance wording matters more than the word “CIF” on the invoice:

• CIF only requires minimum cover. Incoterms® 2020 asks the seller to insure on Institute Cargo Clauses (C) terms, a list of named perils, for at least 110% of the contract value.
• CIP requires all-risks cover. Under CIP the minimum is Institute Cargo Clauses (A), subject to itemised exclusions.
• Frozen cargo needs its own clauses. Cargo damage caused by temperature excursions following a refrigeration breakdown is not automatically covered by a standard cargo policy. For IQF fruit, ask whether the policy includes frozen-food clauses and how a breakdown must be evidenced (reefer logs, surveyor report).

If you need broader cover than the rule requires, write it into the purchase contract: “CIF, insurance on ICC (A) terms” is a valid instruction.

Is FOB the right rule for containerised food?

FOB was written for goods placed on board a vessel. Container cargo is usually handed over at the container yard or terminal days before loading, and the goods are out of the seller’s control from that point. The ICC’s guidance for Incoterms® 2020 therefore suggests FCA for containerised goods.

In practice, “FOB Cat Lai” remains a common way for Vietnamese food exporters to quote, and it works if the contract closes the gap:

• the date and place where the container is handed over (container yard, terminal, or on board);
• who pays origin terminal handling and documentation charges;
• who books the vessel, and what happens if the booked sailing rolls to a later vessel;
• for reefers, who is responsible for the pre-trip inspection, the set point and the power supply until loading — a genset on the road, a plug-in at the terminal.

What does DDP change for an EU or US buyer?

Under DDP the seller arranges import clearance, bears import duty and tax costs under the sales contract, and delivers to the named place. The EU buyer receives the goods against the agreed delivered price. DDP does not determine who is legally liable to customs or tax authorities: that follows applicable law and the declaration and representation arrangements. Confirm the importer, declarant and import VAT roles before shipment. The seller needs a legal structure that can do this. Our EU route uses our VAT- and EORI-registered European company for import coordination, customs clearance, duties, taxes and delivery to the buyer’s warehouse.

DDP simplifies purchasing, but four points still need to be written down:

1. The exact named place. A full delivery address, not a city. Unloading at your warehouse is the buyer’s task unless agreed otherwise.
2. The duty basis. Which tariff code and duty rate the landed price assumes, and who bears a change in duty or an additional tariff between order and arrival.
3. Product-compliance roles. DDP moves customs formalities to the seller. It does not decide who is the food business operator named on the label or who answers to the food authority. Agree this per market.
4. Inspection and holds. Who pays storage, demurrage and sampling if the authorities select the consignment for a document, identity or physical check.

For the United States, the US owner or consignee is normally the FSVP importer, even when the price is agreed on a delivered basis. Settle that role before the first shipment; our guide to FDA registration, Prior Notice and FSVP explains the obligations.

What should every export quote from Vietnam list?

An Incoterm allocates obligations, but it does not list charges. Two FOB quotes can differ by the cost of origin terminal handling; two DDP quotes can differ by the duty rate each one assumed. Ask for the scope line by line:

Add the commercial points that change the price as much as the rule does: free time for demurrage and detention, the payment terms, the required lead time, and whether pre-shipment inspection or third-party testing is part of the offer.

Can dried fruit, coffee, drinks and IQF fruit share one shipment?

Sometimes, but not by default. A mixed order has to work physically, legally and economically:

• Temperature regime. IQF fruit ships in a reefer at frozen temperature. It cannot share a container with ambient products, so a mixed order with frozen and ambient lines means at least two containers, or a reefer consolidation service where one exists on the route.
• Odour and moisture. Green coffee in jute bags picks up odours and moisture. It should not travel next to strongly aromatic goods, and dried fruit needs a dry, ventilated container with moisture control.
• Documents. Each product line carries its own tariff code, origin documents and, where required, certificates. One commercial invoice can cover several lines, but the document set grows with every product added.
• Container economics. Heavy and light products fill a container differently. Beverages reach the weight limit before the container is full; dried fruit and roasted coffee fill the volume first. Mixing can improve the use of a container, or it can push the order into a second one.

When you plan a mixed order, list the products, their temperature needs and the target quantities per line in one RFQ, and ask for the container plan before the price.

How to choose

The right Incoterm depends mainly on who controls the freight and who can act as importer in the destination country.

• First import from Vietnam, no forwarder in Asia: ask for CIF or CFR to your port, or DDP to your warehouse if you want one landed price.
• Regular full-container buyer with contracted freight rates: FOB Cat Lai, with the handover point and origin charges written into the contract.
• EU distributor or retailer without its own import set-up: DDP delivery to the EU.
• US buyer: agree the FSVP importer and the customs broker first, then choose between a port price and DDP-oriented supply.

Our RFQ checklist lists the product, packaging and document details that make an export quotation comparable, and the export documents guide covers the paperwork each product type needs.