When a US supplier quotes "$14 EXW Chicago" versus "$15 FOB Long Beach" versus "$17 DDP Felixstowe," the number on the invoice isn't the cost you will pay. Each Incoterm shifts who pays what and where risk transfers.
This piece walks through the four Incoterms US suppliers use most for international shipments, and how each one feeds into your landed-cost model.
The four most common Incoterms on US-origin quotes
EXW — Ex Works (Place)
- Buyer responsibility starts: at the supplier's dock
- Buyer pays: everything from US factory pickup onward (US inland trucking + export clearance + ocean freight + insurance + destination clearance + duty + VAT + final mile)
- Risk transfers: when goods are made available at the supplier's dock
- Typical for: small orders, factory pickups, when you want maximum control
The trap with EXW: US export clearance is technically your responsibility, not the supplier's. Most US suppliers will help arrange it informally, but legally the obligation sits with you. For shipments containing controlled items (EAR/ITAR), this matters.
FCA — Free Carrier (Place)
- Buyer responsibility starts: when the seller delivers to the carrier
- Buyer pays: ocean/air freight + everything destination-side
- Risk transfers: at handoff to the named carrier
- Typical for: container shipments where the supplier handles US trucking + export but not main carriage
FCA Long Beach means the supplier gets the container to Long Beach terminal and clears US export. From there, you (or your forwarder) handle the ocean leg and everything after.
FOB — Free on Board (Port)
- Buyer responsibility starts: when goods cross the ship's rail at named US port
- Buyer pays: ocean freight + insurance + everything destination-side
- Risk transfers: when goods are loaded onto the vessel
- Typical for: ocean shipments — the historical default for international trade
FOB only applies to ocean/inland-waterway shipments. For containers, FCA is technically more correct (Incoterms 2020 recommends FCA), but FOB remains in widespread use.
CIF — Cost, Insurance, Freight
- Seller pays: cost + insurance + freight to named destination port
- Buyer pays: destination clearance + duty + VAT + final mile
- Risk transfers: still at US port of loading (not destination)
- Typical for: when the supplier has a good freight contract you can't match
The CIF gotcha: risk transfers at US port even though seller pays freight. If the ship sinks mid-Atlantic, the loss is yours — even though the seller arranged the freight. Always carry your own marine cargo insurance regardless of CIF.
DDP — Delivered Duty Paid
- Seller pays: everything to your door, including destination duty and VAT
- Buyer pays: only the invoice
- Risk transfers: at delivery to buyer
- Typical for: high-volume B2B where the supplier wants to own the customer experience
DDP simplifies your accounting but you usually pay a premium of 8–15% over CIF/FOB equivalents. The supplier (or their broker) handles destination clearance — which means you can't reclaim the destination VAT if they paid it. For VAT-registered buyers, DDP is usually a worse deal than DAP.
DAP — Delivered at Place
- Seller pays: everything to delivery except destination duty/VAT
- Buyer pays: destination duty + VAT only (reclaimable if registered)
- Typical for: a popular middle ground
DAP is often the best Incoterm for a VAT-registered cross-border buyer: simple logistics, retained VAT reclaim.
What each Incoterm means for your landed-cost model
For a $14 ex-works US widget, 1,000 units, US → UK:
| Incoterm | Supplier quote | What you add | Total landed (UK) |
|---|---|---|---|
| EXW Chicago | $14,000 | US trucking + freight + duty + VAT + delivery | £15,734 |
| FOB LA | $14,800 | Freight + duty + VAT + delivery | £15,650 |
| CIF Felixstowe | $15,500 | Duty + VAT + delivery | £15,200 |
| DAP UK warehouse | $16,200 | Duty + VAT | £14,950 |
| DDP UK warehouse | $17,400 | Nothing (VAT non-recoverable) | £17,400 |
Notice DDP looks simpler but lands worst for a VAT-registered seller. The supplier paid £2,564 in import VAT you can't reclaim because you weren't the importer of record.
Practical advice
- For first-time orders, ask the supplier for EXW pricing AND a FOB or CIF quote. Compare to a third-party forwarder quote on the freight leg — many suppliers mark up freight 10–25%.
- For VAT-registered buyers, prefer FOB / CIF / DAP. Avoid DDP unless your supplier passes you the destination VAT paperwork (rare).
- For controlled items, never use EXW — the export clearance burden falls on you, and EAR/ITAR mistakes are expensive.
- For ocean containers, use FCA over FOB when you have a choice — it is the modern Incoterms 2020 recommendation.
Tool
The Incoterms Cost Calculator shows the same shipment under each Incoterm so you can compare apples-to-apples before accepting a US supplier quote.
