What is included in the landed cost, and who pays freight and duty?
VANRD · SERVICE PROCESS
What is included in the landed cost, and who pays freight and duty?
Neither question can be answered from the unit price alone. The Incoterm on your quotation decides where our responsibility stops and yours starts — and that single line moves the landed cost more than any negotiation on the piece price.
Direct answer
Under FOB, which is how most apparel from China is quoted, we pay export clearance and the cost of loading your goods onto the vessel at the named port; you pay ocean freight, insurance, import clearance and duty. Under DDP, we carry all of it, duty included, to the address you name. Everything else — EXW, FCA, CFR, CIF, CPT, CIP, DAP, DPU — is a position between those two. So the honest answer to "who pays the duty" is: whoever the Incoterm says, and nothing else.
Why the term decides the landed cost
A piece price is only one line of a landed cost. Add freight, insurance, destination port charges, clearance, duty and the last mile, and the number you actually pay per unit can sit well above the FOB figure you negotiated. Two suppliers quoting the same garment can look 20% apart on the unit price and land within 5% of each other once the terms are aligned — which is why comparing quotations without checking the Incoterm is comparing two different products.
The same logic applies to risk, not just money. Under CIF we pay the freight and insurance, but the goods are yours from the moment they are loaded on the vessel, not when they reach your port. A container damaged mid-voyage is an insurance claim you file, not something we can fix by re-cutting. If that distinction feels uncomfortable, DAP or DDP is the term to ask for.
Who does what, by term
This is the table worth printing. It covers all eleven Incoterms 2020 rules against the five costs that matter in apparel.
| Term | Export clearance | Main freight | Cargo insurance | Import clearance | Import duty |
|---|---|---|---|---|---|
| EXW | Buyer | Buyer | Buyer arranges | Buyer | Buyer |
| FCA | Seller | Buyer | Buyer arranges | Buyer | Buyer |
| FAS | Seller | Buyer | Buyer arranges | Buyer | Buyer |
| FOB | Seller | Buyer | Buyer arranges | Buyer | Buyer |
| CFR | Seller | Seller | Buyer arranges | Buyer | Buyer |
| CIF | Seller | Seller | Seller buys | Buyer | Buyer |
| CPT | Seller | Seller | Buyer arranges | Buyer | Buyer |
| CIP | Seller | Seller | Seller buys | Buyer | Buyer |
| DAP | Seller | Seller | Not required | Buyer | Buyer |
| DPU | Seller | Seller | Not required | Buyer | Buyer |
| DDP | Seller | Seller | Not required | Seller | Seller |
Incoterms 2020. FAS, FOB, CFR and CIF apply to sea and inland waterway transport only; the other seven work with any mode, including air and courier.
The six you will actually meet
EXW — Ex Works
We make the goods and set them down at our premises. You arrange loading, export clearance, freight and everything after. It looks cheap and usually is not: you are buying export handling in China as a foreign buyer, and the paperwork is yours.
FCA — Free Carrier
We clear export and hand the goods to the carrier you nominate at the agreed place. The sensible choice when your forwarder collects from the factory door but you still want us handling export declaration.
FOB — Free On Board
We clear export and load the goods onto the vessel at the named port, for example FOB Shenzhen. Freight, insurance, duty and import clearance are yours. This is the standard term in apparel because both sides keep the part they can control: we know the port, you know your forwarder.
CIF — Cost, Insurance and Freight
We pay freight and buy the minimum cover insurance. Risk still transfers when the goods are loaded on the vessel, not on arrival — the most misunderstood point in the whole set. CIF is CFR plus insurance, nothing more.
DAP — Delivered at Place
We deliver to your named address, ready for unloading, with import clearance and duty still yours. The right term when you have a customs broker but want the transport handled end to end.
DDP — Delivered Duty Paid
We carry freight, export, import clearance and duty to your door. One number, no surprises at the border — but only if the quotation states the duty rate it assumed and who absorbs a change in that rate.
Terms that get confused
| Pair | The real difference |
|---|---|
| EXW vs FCA | Under EXW you load and clear export; under FCA we clear export and hand over to your carrier. |
| FOB vs CIF | CIF adds main freight and insurance paid by us. Risk transfers at the same point in both. |
| CFR vs CIF | Identical except that CIF obliges us to buy insurance and CFR does not. |
| CPT vs CIP | Same pair for any transport mode: CIP adds the insurance obligation. |
| DAP vs DDP | DDP adds import clearance and import duty; DAP leaves both with you. |
| DAP vs DPU | DPU obliges us to unload at destination; DAP delivers ready for unloading. |
How to build the landed cost
Start from FOB and add, in this order: main freight, insurance, destination port or airport charges, customs clearance, duty and taxes, then inland delivery. Freight is the variable that moves most: sea freight on apparel from China typically runs USD 3–8 per kg, air freight USD 8–20 per kg, and air is roughly three to four times the cost of sea for three times the speed. A 300-piece fleece order at about 0.8 kg per piece is roughly 240 kg, so the freight line alone sits between USD 720 and USD 1,920 by sea before any duty.
Two details that quietly change the number. Air and courier charge volumetric weight, not actual weight — a carton of bulky hoodies can bill at nearly twice what the scale says, so pack density matters as much as total kilos. And duty is assessed on the customs value of the goods, by HTS code and country of origin, not on the freight-inclusive price; a DDP quote that does not name the code it priced is a quote you cannot audit.
For lead times by stage and the freight figures behind these ranges, see typical lead time and shipping cost from China to the US and Europe.
Five things to pin down on a DDP quote
- Which duty rate was assumed. US apparel rates have moved more than once in 2026; the quote should name the rate and the date it was checked.
- Who absorbs a rate change between order and entry. If the answer is "we will see", the DDP number is an estimate, not a price.
- Whether destination charges are included — terminal handling, customs brokerage, and any demurrage if clearance is delayed.
- Whether the last mile is included or stops at a warehouse dock, and who unloads.
- What happens if the shipment is held for inspection or a document query, and who pays storage while it waits.
VANRD quotes whichever term the buyer needs — FOB, CIF, DAP or DDP — rather than pushing one house default, because the right term depends on whether you already have a forwarder and a customs broker. For DDP we state the assumed duty rate on the invoice, so the comparison with the FOB number is real. Give us the delivery address and we will price the order landed as well as FOB, and you can decide which side of the border you want to own.
Related questions
Tell us the delivery city and the quantity, and we will quote both FOB and DDP so you can see the landed number side by side. Send your spec to VANRD.
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