One shipment, six prices. Enter the ex-works cost and the freight, and see exactly what each Incoterm adds — per shipment and per unit — so you can quote at whichever handover point your buyer asks for without guessing.
| Incoterm | Amount | Per unit | Adds |
|---|
A supplier gave you a CIF number and you need the FOB equivalent to compare against another quote. CIF includes freight and insurance, so both have to come out — and because insurance is charged on 110% of CIF, the arithmetic is not simple subtraction.
Incoterms are handover points, not price formulas. Each one moves a defined block of cost and risk from the seller to the buyer. The ladder above prices the same shipment at each point.
| Term | Seller pays up to | Buyer pays from |
|---|---|---|
| EXW | Goods at the factory door | Collecting the goods, export clearance, everything else |
| FOB | Goods loaded on the vessel at the origin port | Ocean freight, insurance, destination, duty |
| CFR | Goods plus ocean freight to destination port | Insurance, destination charges, duty |
| CIF | Goods plus freight plus minimum insurance (ICC C) | Destination charges, duty, import VAT |
| DAP | Everything except import clearance and duty | Duty, import VAT, customs clearance |
| DDP | Everything, including duty and clearance | Nothing beyond receiving the goods |
Incoterms require the seller to insure at a minimum of 110% of the contract value, and the premium itself is part of the CIF price — so the two depend on each other. Solving for CIF gives:
CIF = (FOB + freight) ÷ (1 − 1.1 × rate)
At a 0.3% rate the divisor is 0.9967, so the insurance adds about 0.33% of CIF — small. At 1% it adds 1.1%, and on a $200,000 shipment that is $2,200 of premium that a hand-built costing sheet usually leaves out entirely. The reverse direction is where people really go wrong: subtracting freight from CIF gives you a number that is too high, because it still contains the premium.
Quote FOB if you sell to traders and freight forwarders. It is the number they price against, and it keeps the freight negotiation on their side.
Quote CIF if the buyer is small or inland. Buyers who cannot book ocean freight reliably will pay a premium for CIF, and it lets you control the shipping line — which matters when you are shipping a product with a narrow delivery window.
Quote DDP only when you can be the importer of record. DDP into the EU without a VAT registration, or into a US state without a resale certificate arrangement, creates a tax liability that swallows the margin. It is the most common expensive mistake in cross-border e-commerce supply.
Never quote EXW to a first-time buyer. They will discover the China-side export declaration, the origin THC and the documentation fees themselves, and they will blame your price.
Incoterms 2020 recommends FCA rather than FOB when goods are handed to a carrier in a container, because FOB technically requires the goods to be on board the vessel — which the seller cannot control when a forwarder consolidates at a CFS. Most Chinese suppliers still quote FOB, so in practice you quote what the market quotes; just know that the risk transfer point in a container shipment is earlier than the FOB label implies.
Once you have the DDP number, run it through the landed cost calculator for the full breakdown including destination fees, or take the per-unit figure straight to the margin calculator.
The calculator gives you the answer. These guides give you the reasoning, so you can tell when the answer is wrong.
Why a CIF price is not FOB plus freight, how the 110% insurance formula changes the arithmetic, and how to reverse a CIF quote correctly.
Read the guide → Terms · 9 minEvery Incoterms 2020 rule with its cost and risk split, the four that dominate China export, and how the 110% CIF insurance formula works.
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