Insights
Incoterms for hospitality buyers
What DDP, DAP, CFR, FOB and EXW actually cost you, and why the cheapest term on the quote is rarely the cheapest shipment.
Most people buying for a hotel or restaurant opening treat Incoterms as paperwork. A supplier quotes EXW, someone in accounts asks what that means, and the answer comes back as “it is just the shipping term.” Then the invoice arrives with three line items nobody budgeted for.
Incoterms are not paperwork. They are the point at which cost, risk and responsibility transfer from the seller to you. Choosing the wrong one does not just change the freight bill. It changes who is standing there when a customs officer asks a question nobody can answer.
Here is what each of the five you will actually encounter does to your landed cost.
The five terms, in plain language
EXW - Ex Works
The supplier puts the goods on the floor of their factory and stops. You arrange collection, export clearance, freight, import clearance and duty. It looks like the cheapest quote you will ever receive, because almost nothing is included. In Italy in particular, EXW also means you are responsible for export documentation from a country whose language and customs procedure you may not read.
FOB - Free On Board
The supplier delivers to the port and clears the goods for export. Risk transfers once the goods are loaded. You take it from there. Sensible for ocean freight when you have a forwarder you trust and enough volume to negotiate a better rate than the supplier would.
CFR - Cost and Freight
The supplier pays freight to the destination port but not insurance, and risk still transfers at origin. This is the term that catches people out: you are paying for transport you do not control, while carrying the risk on goods you cannot see.
DAP - Delivered At Place
The supplier delivers to your address but you clear customs and pay duty. Good middle ground on high-value, low-volume shipments. The trap is that the supplier chooses the carrier and the routing, so you inherit whatever transit time they thought was acceptable.
DDP - Delivered Duty Paid
The supplier delivers to your door with duty paid. Everything is included, which is exactly why it is the most expensive line on any quote comparison, and often the cheapest shipment overall.
Why DDP usually wins on small orders
Take a single pallet of Italian porcelain to a Miami restaurant. On EXW you will pay for collection, export clearance, air or ocean freight, arrival handling, customs brokerage, duty, and final-mile delivery. Seven cost events, most quoted separately, several of which you cannot price accurately until the shipment already exists.
On DDP the supplier quotes one number. It is higher than the EXW unit price. It is frequently lower than the EXW total, because a manufacturer shipping fifty pallets a month to the United States has freight rates you will never match on one pallet.
The threshold moves with volume. Once you are consolidating multiple suppliers into one consignment, controlling the freight yourself becomes worth it and FOB or EXW starts winning. Below that, paying the supplier to handle it is usually the rational choice, however bad it looks on a price comparison.
Four things that are not on the quote
Duty is not freight
Duty is calculated on the declared value of the goods and the tariff classification, not on the shipping cost. A quote that includes freight but not duty is not a landed cost. Ask which it is, every time.
Classification is your problem
Under most terms you are the importer of record, which means the tariff code on the entry is your declaration. Suppliers guess. Guessed codes get corrected by customs, and corrections arrive as bills.
Certificates travel with the goods
Certificates of origin, mill certificates and food-contact declarations have to exist before the shipment leaves. Chasing one after arrival means the consignment sits, and storage is charged daily.
Wood needs treating
Anything on a wooden pallet crossing a border needs ISPM-15 heat treatment. It is a stamp on the pallet. Missing it can mean the whole shipment is refused entry, over the pallet rather than the goods.
A rule that holds up
Ask every supplier for both an EXW and a DDP price on the same order. Not because you will always take one, but because the gap between them tells you what that supplier actually pays to ship, and whether they are pricing freight honestly or using it as margin.
Then compare DDP against your own landed cost estimate, including duty. If the supplier is within about fifteen per cent, take DDP and spend your attention on something that matters more. If the gap is wider than that, they are marking up freight and it is worth controlling the lane yourself.
The only genuinely wrong answer is choosing a term because it produced the lowest number on a quote comparison, without knowing which of the seven cost events it covered.
Written from the work
I coordinate procurement and freight for hospitality projects across the Americas, the Caribbean, Europe and Asia. Everything above comes from shipments I have run, and mistakes I have watched cost real money.