Import & Export
Landed Cost vs FOB
FOB is an Incoterm price point; landed cost is the buyer's total import expense — know both when sourcing.
FOB = goods on board at origin port. Landed cost = FOB + freight + duty + taxes + delivery to warehouse.
Key Differences at a Glance
FOB (Free on Board) is an Incoterms® rule: seller delivers goods on board the vessel at the named port. The invoice FOB value is the commercial starting point for the buyer's purchase accounting.
Landed cost is a finance/procurement metric: everything spent to place goods in stock, regardless of how the contract names the price.
Seller vs Buyer Obligations
FOB seller pays export clearance and loading; price quote typically ends at origin port on board.
FOB buyer pays freight, insurance (unless CIF), import duty, VAT, and inland delivery — all rolled into landed cost.
Risk Transfer and Cost Structure
Under FOB, risk transfers when goods are on board at origin. Landed cost planning does not change risk timing but affects cash flow and margin.
FOB appears on the commercial invoice; landed cost adds logistics and tax lines often spread across multiple vendors and customs.
Which Term to Choose
Examples
Scenario
Supplier A FOB USD 8 vs Supplier B FOB USD 8.5 — but B's lane duty+freight lower → B wins on landed cost.
Pitfall
Comparing FOB only while ignoring 15% combined duty+VAT destroys margin forecasts.
FAQ
- Can FOB price equal landed cost?
- Only if all import charges are zero — practically never for cross-border trade.
- Is FOB lower than landed cost?
- Always for importing buyers — landed cost is FOB plus downstream charges.
- Does seller know my landed cost?
- Seller sees FOB; buyer must calculate landed cost internally.
- CIF vs landed cost?
- CIF adds freight+insurance to port; landed cost still adds duty, VAT, inland.
- Which for retail pricing?
- Use per-unit landed cost, not FOB alone.
Conclusion
Always pair FOB quotes with a landed cost model. Tools: FOB Calculator and Landed Cost Calculator.