What does each Incoterm actually put on your side?
Incoterms allocate tasks, costs and risk between seller and buyer; they do not transfer title or settle every liability. For a container of battery-powered goods, the important boundary is where the export and import documentation work changes hands, because that is where dangerous-goods declarations, classification decisions and clearance delays land. Choose the term you can actually administer with the people you have.
| Term | Seller handles | Buyer handles | Where control matters most |
|---|---|---|---|
| EXW | Goods made available at the factory | Export formalities, inland transport, everything else | Export declaration and the dangerous-goods handover |
| FOB | Export clearance and loading on board at the named port | Ocean freight, insurance, import clearance, duty and delivery | Freight booking, transit time and document consistency |
| CIF | FOB duties plus ocean freight and minimum insurance to the destination port | Import clearance, duty, delivery and any extra cover | Insurance adequacy and destination charges |
| DDP | Carriage and import formalities to the named place, including duties | Unloading and onward distribution | Who is importer of record, and visibility of duty and clearance costs |
How do you build a landed-cost line that does not lie?
Start from the unit price and add every cost that converts a carton at the factory gate into a unit on your shelf. Then put the same lines against each quotation, even when the supplier has bundled them. The exercise usually reveals that the cheaper unit price sits on the term with more unpriced work, and it gives you a single number that can be compared across suppliers, terms and seasons.
| Cost line | Who usually pays | Commonly omitted |
|---|---|---|
| Unit price, tooling and artwork | Buyer | Tooling amortised over an optimistic volume |
| Inland transport and export handling | Seller under FOB or CIF | Dangerous-goods documentation and terminal handling |
| Ocean freight and insurance | Buyer under FOB | Peak-season surcharges and an insurance gap on lithium cargo |
| Customs duty and additional measures | Buyer under FOB and CIF | A duty rate copied from an undated source |
| Import VAT or GST and broker fee | Buyer | Cash-flow cost before any recovery |
| Inspection, testing and compliance | Buyer | A retest slot when a first report fails |
| Delivery, warehousing and returns | Buyer | A provision for warranty and reverse logistics |
Where does a DDP quote hide its margin?
In everything that is bundled and not itemised. A DDP price includes freight, insurance, clearance, duty and a risk allowance for the seller, but the quotation usually shows one number. Ask for a line-item breakdown, confirm who acts as importer of record and who receives the import VAT documentation, and check that the classification used in the DDP calculation is the one your broker would use. If the answer is a single figure with no breakdown, you cannot tell whether a later price rise is a real cost increase or a margin adjustment.
How should a first order be structured?
The first order buys information. Keep the committed quantity defensible, keep the configuration narrow, and pay for the evidence that makes the second order cheaper: approved samples, test records, artwork proofs, a pre-shipment inspection and a retained unit from the production batch. Reserve a refill slot in the same negotiation rather than returning to the market when the first container sells out.
| Order element | First order | Refill order |
|---|---|---|
| Quantity | A defensible minimum that clears the MOQ without tying up the season | Based on measured sell-through, released by a stated deadline |
| Configuration | One model, one plug, one artwork revision | Identical configuration unless a change is agreed in writing |
| Payment | A deposit and balance structure tied to inspection and documents | Same structure, with the balance gated on the final document set |
| Evidence | Samples, reports, proofs, inspection, retained unit | Batch reference reconciled with the first order file |
| Price review | State the validity period and any raw-material adjustment rule | Confirm the price before release, in writing |
How do you negotiate MOQ without losing the specification?
Do not open by asking for a lower number. Open by explaining what makes the setup cost of the supplier worthwhile, then trade variables they can price. A factory sets MOQ to recover line setup, material minimums, printing and tooling. Offer to reduce those costs instead of asking the factory to absorb them: fewer artwork variants, standard packaging, one plug type, a shared colour, or a written refill commitment that justifies a lower setup charge.
- Ask what drives the MOQ: is it a material minimum, a printing minimum, a tooling amortisation or a production line setup?
- Reduce variants: one plug, one language version and one carton design for the first order.
- Offer a commitment: a dated second-order window or a rolling forecast in exchange for a lower first-order threshold.
- Separate customisation: agree a plain-stock MOQ first, then price logo printing, custom colour and bespoke packaging as separate gates.
- Protect the specification: state that a lower MOQ does not change the cell, driver, cable, clamp, artwork or test record.
Which clauses protect the price after the negotiation?
A negotiated price can be unwound by an unspecified inspection standard, an open-ended raw-material clause or a balance payment due before the documents exist. Put the technical and commercial terms in the same annex: the configuration, the inspection level and defect classes, the document set due before balance, the remedy for a failed inspection, the price validity period and the rule for any cost adjustment.
- Approved configuration list with a written-notice requirement for any substitution.
- Inspection standard: sampling level, critical, major and minor defect classes, and who pays for a re-inspection.
- Due dates and owners for test records, declarations, artwork proofs and the final document set.
- Remedy for a failed inspection: corrective work, re-test, replacement or price adjustment, with a deadline.
- Price validity, currency, and a narrow, evidence-based adjustment rule rather than an open clause.