How to Calculate Your Export Price: From Factory Cost to FOB Quote

2026-10-02

Build the price from factory cost upwards

Do not start with a guessed export price. Build a line-by-line calculation that someone in the factory can check.

Begin with the product cost. Record each applicable element:

Materials
Labour
Energy
Consumables
Packaging
Inbound handling
Outbound handling

Keep ordinary product packaging separate from any additional export packing or crating. This makes a later increase in packaging cost visible instead of hiding it inside a general factory-cost figure.

Next, add only the export-related costs that apply to the shipment. Record each one separately rather than combining everything into an unexplained adjustment.

Screen the export-related additions

West Virginia Division of Economic Development guidance names export crating, heat-treated wood pallets, truck freight to port, the cost of credit and interest charges on credit terms as export-related additions to a product cost. International Trade Administration guidance supplies the other side of the calculation: the landed cost that includes insurance, freight, tariffs and taxes, and other fees.

Use this checklist to screen the calculation:

Export packing or crating
Heat-treated wood pallets, where required
Truck freight to port, where applicable
The cost of credit
Interest charges if credit is offered

Those five come from the state export-assistance guidance cited above. Add them only where they apply, and check each against the chosen sale term.

Insurance, freight, tariffs and taxes sit on the other side of the calculation, in landed cost. Record them there rather than folding them into factory cost.

If credit is offered, show the cost of credit and any interest as separate amounts. Do not leave financing costs inside an unexplained markup. The same approach applies to insurance: record the amount or state clearly that insurance is not included.

Place the calculation under the correct Incoterm

For sea and inland waterway transport, the International Trade Administration lists the Incoterms 2020 rules as:

FAS — Free Alongside Ship, at a named port of loading
FOB — Free on Board, at a named port of loading
CFR — Cost and Freight, at a named port of destination
CIF — Cost, Insurance and Freight, at a named port of destination

An FOB quote therefore names a port of loading, not the buyer’s final destination. State the named loading port as the delivery point. CFR and CIF instead name a port of destination.

FOB is not another name for a landed-cost total. In the quotation, distinguish the sale price from costs that are not included. The cited Incoterms guidance establishes the named delivery points, but it does not provide a detailed FOB allocation of loading, carriage, risk or other obligations. Do not invent such a checklist or include a destination charge under FOB without checking the sale terms.

Calculate landed cost separately

Landed cost is the total expense of getting the shipment to its destination, described by the International Trade Administration as the total price once the product has arrived at the buyer’s doorstep. It includes:

The original product price
Insurance
Freight
Tariffs
Taxes
Other fees

Buyers often ask for landed cost while negotiating a purchase. It allows the additional import and delivery charges to be considered separately from the product price.

Find the Harmonized System code for the product in the importing country, then look up that country’s tariffs and taxes. Tariffs are organised by HS classification and are often expressed as a percentage of product value. A tariff is the rate or category; the duty is the amount actually owed.

Check for customs fees, value added tax and national or local sales taxes. Record the basis used to calculate each charge. International Trade Administration guidance says many tariffs and taxes use the CIF Incoterm value. It also says the obligation to pay duties and taxes is often determined by the Incoterm in the sales contract; customs brokers or freight forwarders can help check that point.

Make the quotation easy to check

U.S. Commercial Service guidance says a quotation should describe the product, state its price, set the shipment time and specify the terms of sale and payment. An overseas quotation normally needs more product detail than a domestic quotation.

Include these fields:

Seller’s and buyer’s names and addresses
Buyer’s reference and date of inquiry, where relevant
Products listed, with a clear description
Price of each item
Whether an item is new or used
Total cubic volume packed for export
Dimensions packed for export
Gross shipping weight
Net shipping weight
Metric units where appropriate
Trade discount, if applicable
Delivery point
Terms of sale
Terms of payment
Insurance and shipping costs
Validity period
Total charges payable by the customer
Estimated shipping date
Currency of sale

If a specific price is agreed or guaranteed, state the precise period during which the quotation remains valid.

A pro forma invoice presents the quotation in invoice format. U.S. Commercial Service describes it as a preferred method in exporting and states that it is not used for payment purposes. The price calculation should still show the underlying product and shipment fields so that the document can be checked.

Keep commission and agent fees explicit

The evidence used for this article does not cover commission rates, agent-fee rules or market practice. If a commission or agent fee applies to a transaction, show it as an explicitly stated line item or state that it is excluded. Do not invent a percentage or conceal the fee in the product price.

Sources and use boundary

This article relies on International Trade Administration guidance on total export price and Incoterms, U.S. Commercial Service guidance on quotations and pro forma invoices, and West Virginia Division of Economic Development export-price guidance.

These sources do not establish a universal FOB formula, margin benchmark, commission percentage, detailed allocation of every FOB obligation, or what a particular buyer will accept. The applicable sale terms and calculation records remain necessary for each shipment.