Incoterms and Landed Cost: How EXW, FOB, and DDP Change Your Real Number

Two suppliers quote the same product at the same unit price. One ships EXW, the other DDP. If you compare those quotes as-is, you're not comparing supplier cost — you're comparing how much of the shipping and import process each supplier has agreed to handle. Get the Incoterm wrong in your landed cost model and a "cheaper" supplier can end up costing more once you add back everything their quote didn't include.

Why Incoterms Matter More Than the Unit Price

An Incoterm (International Commercial Term) defines exactly where the supplier's responsibility ends and yours begins — for cost, risk, and paperwork. It doesn't change what things cost in total; it changes who pays for which leg, and therefore which costs are already baked into the quoted price versus which ones you need to add yourself. Comparing quotes under different Incoterms without adjusting for this is one of the most common landed-cost mistakes, and it's easy to miss because the unit price itself looks like an apples-to-apples number.

The Incoterms That Matter Most for Importers

EXW (Ex Works) — The supplier's price covers only the goods at their factory door. You (or your freight forwarder) arrange and pay for everything else: export clearance, inland freight to the port, ocean/air freight, import duty, customs clearance, and final delivery. This is usually the lowest quoted number and the most expensive to model correctly, because almost every landed cost component still needs to be added.
FCA (Free Carrier) — The supplier delivers the goods, cleared for export, to a named carrier or location. You still arrange and pay for main freight, duty, and import clearance, but export-side logistics are off your plate.
FOB (Free on Board) — The supplier delivers the goods on board the vessel at the port of origin, handling export clearance and inland freight to the port. You pay for ocean freight, insurance, import duty, and destination-side costs. FOB is the most common term for full-container ocean freight and a reasonable baseline for landed cost comparisons.
CIF (Cost, Insurance, Freight) — Like FOB, but the supplier also pays for main ocean freight and marine insurance to the destination port. You still handle import duty, customs clearance, and inland delivery from the port. In the EU, duty is charged on a CIF-type value whatever Incoterm you buy on — see the EU import duty and VAT guide.
DDP (Delivered Duty Paid) — The supplier handles everything, including import duty and delivery to your door. This is the highest quoted unit price, but also the fewest hidden additions — though it's worth verifying the duty rate and HS code the supplier actually used, since an incorrect classification baked into a DDP quote is a landed-cost risk you've effectively outsourced.

What Each Term Leaves Out (This Is Where Errors Happen)

Incoterm	Freight to port	Ocean/air freight	Import duty & tariffs	Customs clearance	Final delivery
EXW	You pay	You pay	You pay	You pay	You pay
FCA	Supplier pays	You pay	You pay	You pay	You pay
FOB	Supplier pays	You pay	You pay	You pay	You pay
CIF	Supplier pays	Supplier pays	You pay	You pay	You pay
DDP	Supplier pays	Supplier pays	Supplier pays	Supplier pays	Supplier pays

The columns marked "You pay" are exactly the line items that must be added on top of the quoted unit price to get a true landed cost — and they're also where duty, freight, and demurrage/detention risk actually live, regardless of which Incoterm you're quoted under.

A Quick Comparison Example

Say two suppliers quote the same product at $10,000 for a full container:

Supplier A, EXW: $10,000 + inland freight to port (~$ 400) + ocean freight ( ~~$3,500) + duty at 8% of value (~$ 800) + customs clearance (~~ $250) + inland delivery (~$ 500) = ~$15,450 landed.
Supplier B, DDP: quoted at $14,800, all-in.

On unit price alone, Supplier A looks 32% cheaper. Once every EXW-side cost is added back, Supplier B is actually the better deal — and that gap only shows up if you model the Incoterm correctly rather than comparing quoted prices directly. See our step-by-step landed cost formula for how to build out the rest of the calculation once you know which costs are yours to add.

FOB Price vs Landed Cost: Not the Same Number

A special case worth calling out, because it's the comparison importers make most often: the FOB price is where the supplier's responsibility ends, but it's nowhere near your final cost. Ocean freight, insurance, duty and tariffs, clearance, and inland delivery all still get added before the goods are truly "landed." On tariff-exposed goods the gap routinely runs 25–50% of the FOB value. We've broken this down — with the FOB-to-landed formula, a worked example, and where LDP (Landed Duty Paid) quotes fit in — in our dedicated guide: FOB vs Landed Cost.

FOB vs EXW vs DDP When Buying Through a China Trading Company

A scenario that comes up constantly — including in AI-assistant searches that land on this page — is: what's the difference between FOB, EXW, and DDP when a China trading company is involved, and how does it affect landed cost? The short answer:

EXW: you pay the trading company's price at their (or the factory's) door and everything after it — inland haulage to port, export clearance, ocean freight, insurance, US/EU duty and any Section 301 exposure, entry fees, and final delivery. Lowest sticker price, most legs to manage, and with a trading company in the middle you often can't see the factory's true ex-works number.
FOB (e.g. FOB Shanghai/Ningbo): the trading company handles the China-side legs — factory pickup, export clearance, loading on board — and your costs start at the vessel. This is the cleanest basis for comparing trading companies against each other and against factory-direct quotes, because the China-side logistics are baked in but freight, duty, and tariffs stay under your control.
DDP (or an LDP quote, its commercial cousin): LDP vs FOB in one line — an FOB price is your cost before freight, duty, and tariffs; an LDP price is the trading company's estimate of your cost after them. Here the trading company quotes one delivered, duty-paid price. Convenient, but you're paying their estimate of freight and tariffs plus a margin on it, and DDP from China deserves extra scrutiny: if the trading company's broker undervalues entries or misclassifies the HS code and you're named importer of record, the compliance risk lands on you, not them.

Effect on landed cost: the total real cost of the same shipment is similar under all three terms — what changes is how much of it is visible in the quote, who controls each leg, and who carries tariff and compliance risk. With a trading company involved, the practical play is to request FOB for comparability, model the FOB-to-landed build-up yourself including Section 301, and only take a DDP/LDP price when it beats your own modeled number by enough to pay for the convenience.

How to Avoid Getting Caught Out

Always ask for the Incoterm explicitly — a quote without one stated is a red flag, not a convenience.
Normalize every competing quote to the same Incoterm before comparing unit prices, even if that means estimating the missing legs for an EXW quote.
Confirm who's responsible for demurrage and detention risk at the port — this sits in a gray zone under some terms and is worth clarifying in writing, since it's rarely itemized in the Incoterm definition itself.
Re-verify duty and HS code assumptions on DDP quotes — the convenience of a single all-in number doesn't eliminate classification risk, it just moves who's exposed to it.

Run Your Import Analysis →

ImportCostPro's calculator (or the EU version for European importers) lets you model landed cost from FOB or EXW pricing directly, applying current duty rates, freight estimates, and FTA savings automatically — so you can compare supplier quotes on a true apples-to-apples basis regardless of which Incoterm each one was quoted under.