Two quotes for the same garment can differ by a dollar and mean exactly the same landed cost — because they are quoted on different shipping terms. Incoterms decide where the factory's responsibility ends and yours begins: who books freight, who insures the goods, who clears customs, and who pays the duty. Compare quotes without normalising the terms and you are comparing nothing.
Here is what each term actually covers, what it costs, and how to choose — including the honest case for and against the 'everything included' option.
The terms, from least to most factory responsibility
EXW — Ex Works
You collect the goods at the factory gate; everything after — export clearance included — is yours. It looks like the cheapest quote and is almost never the right choice for apparel buyers, because handling export formalities in the supplier's country is exactly the job you are least equipped to do from abroad.
FOB — Free On Board
The factory delivers goods loaded on the vessel at the port of origin (for Bangladesh, Chattogram), export-cleared. From that moment — freight, insurance, import clearance, duty, inland delivery — it is yours, usually via your freight forwarder. FOB is the global default for apparel sourcing for good reason: responsibilities split at a clean, verifiable point, and you control the expensive leg with your own forwarder relationships.
CIF / CFR — Cost, Insurance and Freight
The factory additionally books and pays ocean freight to your destination port (CIF adds marine insurance; CFR does not). Useful when you have no forwarder relationship — but note the fine print buyers miss: under CIF, risk still transfers at the origin port, even though the seller paid the freight. If the container goes over the side mid-ocean, it is your claim. Also, freight bought by the seller is freight marked up by the seller.
DDP — Delivered Duty Paid
The supplier delivers to your warehouse door with freight, insurance, customs clearance and import duty all handled and included in the price. One invoice, zero logistics on your side. The trade-offs: you cannot see the freight and duty components individually, you depend on the supplier's clearance competence in your country, and errors in duty payment can surface later with your name on the import record. With a supplier who runs DDP routinely through an established network — as we do — it is genuinely the simplest way for a small team to import; with an improvising supplier, it is where surprises live.
| Responsibility | EXW | FOB | CIF | DDP |
|---|---|---|---|---|
| Export clearance | Buyer | Seller | Seller | Seller |
| Ocean freight | Buyer | Buyer | Seller | Seller |
| Marine insurance | Buyer | Buyer | Seller | Seller |
| Risk transfers at | Factory gate | Vessel, origin port | Vessel, origin port | Your door |
| Import clearance & duty | Buyer | Buyer | Buyer | Seller |
| Inland delivery | Buyer | Buyer | Buyer | Seller |
What the choice costs
As rough orders of magnitude for a garment order from Bangladesh: sea freight adds something like $0.15–$0.50 per piece depending on container utilisation; insurance is small (roughly 0.3–0.5% of value); destination charges, clearance fees and inland haulage add more; and duty depends entirely on your market — zero into the EU and UK under Bangladesh's preferential access, tariff-rate into the US. A DDP price bundles all of this plus a management margin. The point of comparing terms is not that one is cheaper — the same costs exist under every term — but who buys each component, and how visibly.
“Always compare quotes on the same term. A $4.60 DDP quote can be cheaper than a $3.90 FOB quote once freight, clearance and duty are added — and a seller quoting CIF controls a cost you cannot see.”
How to choose
- First order, no forwarder, small team — DDP from a supplier with a proven delivery network. Pay for the simplicity; it is worth it while you learn.
- Growing brand, regular shipments — FOB with your own forwarder. You gain rate control, visibility and consolidated shipments across suppliers.
- Retail and wholesale programmes at scale — FOB, almost always, with routed freight under your logistics contracts.
- Never EXW from Bangladesh unless you have in-country logistics capability — the savings are imaginary and the export-clearance burden is real.
One more practical note: whatever the term, confirm it in writing with the named place — 'FOB Chattogram, Incoterms 2020' — on the proforma invoice. The current rules are published by the International Chamber of Commerce, and the named-place detail prevents the most common disputes about where handover actually happens.
Frequently asked questions
- What does FOB mean in clothing manufacturing?
- Free On Board: the factory's price includes manufacturing, export clearance and loading the goods on the vessel at the origin port. Freight, insurance, import duty and delivery from there are the buyer's responsibility.
- Is DDP more expensive than FOB?
- The same underlying costs exist under both; DDP bundles them with a management margin, FOB lets you buy freight and clearance yourself. DDP usually costs somewhat more and saves substantially more hassle — which is a good trade for small teams and a poor one at scale.
- What is the difference between CIF and FOB?
- Under CIF the seller also pays ocean freight and insurance to your port — but risk still transfers at the origin port, and the freight is priced by the seller. FOB leaves freight buying, and its cost visibility, with you.
- Who pays import duty under DDP?
- The seller pays it and builds it into the price. You should still know your product's duty rate — you are the importer of record's beneficiary, and bundled duty is still your money.
- Which Incoterm is best for a first order?
- DDP if your supplier runs a genuine delivered network, otherwise FOB with a freight forwarder recommendation. Avoid EXW.
- Do Incoterms cover payment terms?
- No — they allocate transport costs, risks and clearance duties only. Payment terms (deposit, balance against documents, letters of credit) are negotiated separately.
Belle Vouz ships FOB, CIF and worldwide DDP with full export documentation. Tell us your destination and volumes and we will quote the same order both ways — FOB and DDP — so you can see exactly what the convenience costs.