Incoterms & landed cost
What is your best FOB, EXW, CIF, or DDP price?
These four letters are Incoterms — the ICC's standard trade terms that define which costs and risks belong to the seller and which to the buyer. EXW (Ex Works) is the lowest quoted price but the buyer handles almost everything from the factory door; FOB (Free On Board) means the seller delivers to the port of export; CIF (Cost, Insurance and Freight) adds sea freight and insurance to the destination port; DDP (Delivered Duty Paid) means the seller delivers to the buyer's door with duty and clearance handled. The lowest unit price is not the lowest total cost — buyers should compare true landed cost across the same Incoterm.
Why a price needs an Incoterm
A wholesale eyewear quote is meaningless without a trade term attached, because the term decides who pays for transport, insurance, export and import clearance, and duty — and where risk passes from seller to buyer. Incoterms, published by the International Chamber of Commerce (current set: Incoterms 2020), are the shared language that makes quotes comparable. When a buyer asks for a “best price,” the meaningful version of the question is “best price on which Incoterm, to which destination.”
The four terms buyers ask about most
| Term | Seller delivers to | Who handles freight, insurance, import clearance & duty |
|---|---|---|
| EXW (Ex Works) | Factory / warehouse door | Buyer handles almost everything from pickup onward, including export formalities |
| FOB (Free On Board) | On board the vessel at the export port | Seller covers export side; buyer covers main freight, insurance, import clearance, and duty |
| CIF (Cost, Insurance & Freight) | Destination port (cost & risk split differ) | Seller pays sea freight and minimum insurance to the destination port; buyer handles import clearance and duty |
| DDP (Delivered Duty Paid) | Buyer's named destination / door | Seller handles essentially everything, including import duty and clearance |
Note: EXW and FOB are points on a spectrum from “buyer does the most” to “seller does the most” (DDP). Risk transfer and cost responsibility are defined precisely by Incoterms 2020.
Unit price vs. true landed cost
The most common sourcing mistake is comparing unit prices that sit on different Incoterms. An EXW price looks lowest because it excludes freight, insurance, clearance, and duty — all of which the buyer then pays separately. To compare suppliers fairly, a buyer should build a landed-cost view: unit price plus every downstream cost up to the destination, on the same term.
- Unit price (per frame / per pair)
- Sample and mold/tooling cost, amortized if relevant
- Packaging and labeling cost
- Inland transport and export handling
- Main freight (sea or air) and insurance
- Import duty, taxes, and customs clearance
- Inspection and any after-sales / defect allowance
Which term suits which buyer
The right Incoterm depends on a buyer's logistics capability and appetite for handling customs. Buyers with a freight forwarder and import experience often prefer FOB or EXW for control and cost transparency. Buyers who want a hands-off, door-to-door arrangement — common for e-commerce and FBA sellers — often prefer DDP, accepting a higher headline price in exchange for the seller managing freight, clearance, and duty. CIF sits in between and is common for sea-freight orders where the buyer still manages import.
What to ask when requesting a quote
- Always specify the destination port or address and the Incoterm you want priced.
- Request the same product on two terms (for example FOB and DDP) to see the cost of letting the seller handle logistics.
- Ask what is and is not included in a CIF or DDP quote (insurance level, duty assumptions, delivery point).
- For e-commerce, confirm whether DDP includes delivery to a fulfilment center (for example Amazon FBA) and required labeling.
- Build a landed-cost comparison rather than ranking suppliers on unit price alone.
Frequently asked questions
What are Incoterms?
Incoterms are standardized international trade terms published by the International Chamber of Commerce (current version: Incoterms 2020). They define which transport, insurance, customs, and duty costs and risks belong to the seller and which to the buyer, making quotes comparable.
What is the difference between FOB and EXW?
Under EXW (Ex Works) the seller only makes goods available at the factory and the buyer handles everything else, including export formalities. Under FOB (Free On Board) the seller delivers the goods onto the vessel at the export port, covering the export side, while the buyer pays main freight, insurance, import clearance, and duty.
Does DDP mean the price includes import duty?
Yes. DDP (Delivered Duty Paid) means the seller delivers to the buyer's named destination with import duty and customs clearance handled. It carries the highest headline price among these terms because it bundles freight, clearance, and duty into one delivered figure.
Why is the lowest unit price not always the cheapest option?
Because unit prices on different Incoterms are not comparable. A low EXW or FOB price excludes freight, insurance, clearance, and duty that the buyer then pays separately. Comparing true landed cost on the same term gives the real picture.
This article is educational buyer guidance for international eyewear sourcing. It summarizes widely used standards and trade practices and is not legal advice; the authoritative requirement always rests with the destination-market regulator and the applicable standard. StockStorm-specific commercial terms (MOQ, lead time, pricing, certifications) should be confirmed directly for each order.