Quotation term
Quotation term — The three letters after the price that divide how much of the journey — truck, export customs, ocean, insurance, import customs — is inside the number and where the cost becomes yours. Not offer decoration: the unwritten half of the price.
Cost against risk
Cost against risk — Two separate things every term splits differently. The Incoterm says who pays each leg and where their wallet stops; the risk transfer says whose box it is when something goes wrong en route. Comparing quotes without separating the two is comparing incomparable numbers.
| EXW (ex works) | the lowest price and the most journey: from the factory door onward, all yours |
|---|---|
| FOB (free on board, origin) | supplier delivers aboard at the origin port — ocean and home country legs are yours |
| CIF (cost, insurance, freight) | supplier pays ship and insurance to your port — your import customs is still yours |
| DDP (delivered duty paid) | everything to your door including home-country taxes — the high price is honest if you read it whole |
| The gaps between terms | where surprises live: handling, port storage, inland truck, your customs broker |
The price is not the number; it is the number’s scope
Two suppliers can sell the same item at the same factory cost and land at your door twenty percent apart, with nobody lying: their quotation terms simply load different legs. The comparison begins by translating both offers onto one basis — yours, with your broker, to your address — and ends with one landed cost per unit, which is the only comparable number. Everything before that conversion is a conversation about assumptions.
Where a shipment actually gets expensive
Surprises rarely live in the ocean freight, which is public and quotable in writing. They live in the legs no term owns because they belong to nobody: the container waiting an extra day while a document is corrected, the port storage charged by calendar day, the agency inspection that was not on the list. A buyer budgeting “FOB plus ship plus customs” is budgeting a voyage that does not exist; the budget that survives reality carries a contingency line and a broker paid to manage, not to be surprised.
The negotiation that actually moves the number
It is not the nominal discount — it is scope. Moving a small buyer from EXW to FOB spares them their first logistics nightmare and costs the factory little, because the plant trucks cartons to the port every day anyway. Moving CIF to “CIF plus this list of what it excludes” spares the buyer most of their future grievances. The useful sentence is never “lower your price”; it is “what does it cost to get this to this point, and which legs are not in that phrase.”
Which term suits a first import?
For learning: FOB or CIF with your own broker engaged on your side. The supplier controls none of the home-country side, you see every leg's bill, and you learn your operation's real cost. DDP looks like the easy option and is the one that most delays that education — because an importer who has never cleared customs does not know what they are paying for on the day DDP stops being true.
Why do two identical FOB quotes land at different final costs?
Because FOB ends at the same port for both, but each describes a different package behind it: which carton, which carrier, which destination port, who pays the supplier's inland truck to the quay. The honest comparison is requested on one shared basis — quote DDP to my address, or quote FOB with these named legs — not on the faith of three letters.