FOB, CIF, DDP: How to Calculate Your True Landed Cost as a US Importer

The most expensive mistake in import buying is comparing supplier quotes that are not quoting the same thing. A $4.10 quote can be more expensive than a $4.60 quote once you account for what each price includes. The decoder ring is the Incoterm.

The Three Incoterms You Will Actually See

• EXW / Ex-Factory — the goods at the factory gate. Everything else — trucking, export clearance, freight, insurance, import duty, delivery — is on you.
• FOB (Free On Board) — the supplier delivers the goods loaded on the vessel at the origin port, export-cleared. You pay ocean freight onward. The most common term for container buyers.
• CIF (Cost, Insurance & Freight) — supplier pays freight and minimum insurance to your named US port. Sounds convenient; you still handle import clearance, duty, and inland delivery — and you have less control over the freight quality.
• DDP (Delivered Duty Paid) — supplier delivers to your door with duty paid. Simplest for you, and the price includes everyone's margin on every step.

The Landed-Cost Formula

Landed cost per unit = (Product cost + inland transport + export/origin charges + ocean or air freight + insurance + import duty & fees + destination port charges + customs brokerage + delivery to warehouse) ÷ units shipped.

A Worked (Illustrative) Example

Say you order 5,000 units at $4.00 FOB Karachi — $20,000 of product. Illustrative additional costs: ocean freight for a container share $2,500; insurance $150; import duty at an assumed 8% HTS rate on customs value $1,600; port/handling/broker fees $900; trucking to your warehouse $850. Total landed: $26,000 → $5.20 per unit — 30% above the "price" you compared on. Every real program should run this math with its own HTS rate and current freight quotes; the point is the structure, not these placeholder numbers.

Where Buyers Get Surprised

• Duty on the wrong base — US duty is assessed on customs value (the goods), not on freight — one of the few places the US system is kinder than most.
• LCL handling fees — less-than-container shipments carry destination charges that can shock small importers.
• Storage/demurrage — slow document handoffs at the port turn into daily fees.
• Re-inspection and rework — the hidden cost of skipping pre-shipment QC. One rejected batch erases years of freight savings.

Which Term Should You Buy On?

For most SMB importers: FOB with a freight forwarder you choose gives the best balance of control and simplicity — you see the real freight market, and your forwarder works for you. DDP is reasonable for first orders when you want zero moving parts and accept the premium for it. When we quote at SialSourcing, we price the term you prefer and itemize what is inside the number, so comparison shopping stays honest.

Want a real landed-cost estimate for your product instead of placeholder math? Send us the spec — quantity, destination ZIP, and target product — and we will return the full breakdown within 24 hours.