The two most common types of pricing in international trade are FOB (Freight on Board) and DDP (Delivered Duty Paid) / LDP (Landed Duty Paid). Here are the steps involved for each type:
FOB Pricing:
Cost of Manufacturing: This is the cost to manufacture the product and put it on the boat in the country of manufacture. The quoted price includes only this cost and does not cover any further expenses.
Boat Freight: After the product is loaded onto the boat, it is transported from the overseas port to the US port via sea freight. The time taken for this transport can vary depending on port locations and can take anywhere between 15-45 days. The cost of boat freight needs to be considered separately.
Inland Freight: Once the product arrives at the US port, it needs to be transported from the port to your warehouse or office. This is an additional expense that is separate from boat freight.
Duty: To import the product from overseas into the US, duty rates may apply, depending on the Country of Origin (COO). Duty rates can range from 0% to 37.5%, and the rates vary based on the type of product and its HTS code.
Insurance: It is advisable to insure the product during transport to protect against any damages or loss.
Customs Clearance: Getting the product through customs requires compliance with regulations and may involve inspections and providing additional documentation. Delays can occur during this process.
Freight Forwarders: To handle the complexities of the shipping process, you can hire a freight forwarder who can assist with getting the product into the US. This service comes at an additional cost.
DDP / LDP Pricing:
This pricing includes all the costs involved in getting the product from the factory to your doorstep. These costs include freight, duty, and insurance.
The factory takes care of managing and paying for all the logistics involved in transporting the product, including boat/inland freight, customs, duty, and insurance.
Not all factories may be willing to offer DDP or LDP pricing, as they prefer to avoid the additional responsibilities and costs associated with it. However, it is worth asking the factory if they can provide this type of pricing.
It is important to be aware of the type of pricing you are getting from your factories, as the total cost can vary significantly between FOB and DDP/LDP pricing. It is also worth considering these costs when deciding between overseas manufacturing and domestic manufacturing.
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