The Incoterm you negotiate with your supplier doesn't just determine who pays for shipping — it directly affects how much you pay in import duties. Here's how the most common shipping terms impact your tariff costs.
You're responsible for everything from the factory door. Your customs value includes: product cost + inland freight in origin country + international shipping + insurance. You have maximum control but also maximum responsibility.
The most common term for sea freight. The supplier delivers goods to the port of export. Your customs value includes: FOB price + international shipping + insurance. This is the most straightforward for duty calculation.
The supplier arranges and pays for shipping and insurance to the US port. Your customs value = the CIF price. This simplifies your calculation but you have less control over shipping costs.
The supplier handles everything including US import duties. Sounds great, but you lose control over HTS classification, customs value declaration, and broker selection. Many suppliers inflate the duty estimate as a hidden markup.
✅ Recommended: FOB
FOB gives you the best balance of control and simplicity. You control the shipping rate (which affects customs value), choose your own customs broker, and manage your HTS classification. This is the standard for experienced importers.
⚠️ Avoid: DDP from Chinese suppliers
When a Chinese supplier offers DDP pricing, they often inflate the tariff estimate by 5-15%. They may also use aggressive HTS classifications that increase your compliance risk. And if CBP has questions about the entry, you have no visibility or control.
Calculate Your Landed Cost Under Any Incoterm
Landed Cost Calculator →Indirectly yes. The Incoterm determines what costs are included in the customs value. Higher customs value = higher duties since tariffs are a percentage of customs value.
Generally no. DDP gives you less control and suppliers often inflate duty estimates. FOB is recommended for most importers as it provides the best balance of control and cost visibility.