Lesson 15 · Export & merchandising
Incoterms: EXW, FOB, CFR, CIF and landed cost
9 min
In a real company
Export merchandiser, shipping / documentation, buying house
The Incoterm decides who pays for what between the factory and the buyer's warehouse. Quoting FOB when the buyer expects CIF can wipe out an order's profit.
Key ideas
- EXW: buyer collects from your factory.
- FOB: you deliver on board at the Indian port (inland transport + export clearance are yours).
- CFR = FOB + sea freight. CIF = CFR + insurance.
- Landed cost (buyer side) = CIF + import duty + destination charges.
Formula
- FOB
- = (Cost × (1 + Profit%) + Inland + Docs) ÷ (1 − Commission%)
- CFR
- = FOB + Freight
- CIF
- = CFR + Insurance
- Landed
- = CIF × (1 + Duty%) + Destination charges
Worked example
Woven shirt to the USA, 10,000 pcs. Manufacturing ₹430 + packaging ₹9, profit 12%, inland ₹6/pc, documents ₹35,000 total, commission 5%. Freight ₹18/pc, insurance 0.3% on CFR + 10%, US duty 20%, destination ₹8/pc. $1 = ₹83.50.
- 1Cost ₹439 → + 12% = ₹491.68
- 2+ inland ₹6 + docs ₹3.50 = ₹501.18 → ÷ 0.95 = FOB ₹527.56 ($6.32)
- 3CFR = ₹545.56 → insurance ₹1.80 → CIF ₹547.36
- 4Landed = 547.36 × 1.20 + 8 = ₹664.83
✅ FOB ₹527.56 ($6.32); the buyer's landed cost is ₹664.83.
Try it live in the calculatorCommon mistakes
- Forgetting documentation and CHA charges in FOB.
- Quoting CIF without a current freight rate.
- Using an old exchange rate.
Quick quiz
Answer 2 of 3 correctly to complete the lesson.
1. Under FOB, who pays the sea freight?
2. CIF = ?
3. FOB ₹500 at ₹83.50 per $ = ?