How to Read a Garment Quote: EXW, FOB and DDP Line by Line

FOB, Free On Board, means the quoted price covers the garments, export clearance and loading onto the ship at the port of origin, and nothing after that. Under the ICC's Incoterms 2020 rules, risk passes to you once the goods are on board the vessel. You then pay for the rest of the journey: sea freight and insurance, charges at the destination port, the customs broker's fee, any duty, import VAT or GST, and delivery inland to your warehouse. Those invoices tend to arrive later, as separate bills from forwarders and brokers who were not part of the quote. FOB is a sea-freight term; if the order is flying, the matching term is FCA. An FOB figure is not a bad price, just an incomplete one, so note the port it is quoted from and convert it to a landed cost before you set it beside a quote written on any other basis.

DDP, Delivered Duty Paid, means the seller delivers the goods to your address with export clearance, import clearance and duty handled on their side, and carries the risk until the goods arrive. The ICC Academy describes it as the rule that places maximum responsibility on the seller, which is why a DDP figure sits closest to your landed cost. Two points still need checking on any DDP quote. First, import VAT or GST: some DDP quotes are duty paid but tax excluded, so ask for the tax to be confirmed in writing as inside or outside the price. Second, ask whose company is named as importer on the customs entry, because a VAT-registered brand named there can reclaim the tax, while an entry in a forwarder's name leaves it unrecoverable. The ICC Academy also notes that some countries bar foreign companies from handling import formalities, so ask who will do them in yours.

Convert the FOB quote into a landed cost, then set that total against the DDP figure. Take a UK example: 500 cotton tees at US$5.40 FOB is US$2,700. Add sea freight and insurance, assumed here at US$600, though a forwarder will quote your real lane and season. Duty is zero for Bangladesh origin under the UK's DCTS. Import VAT is 20% of the customs value, which in the UK includes freight and insurance to the border, plus any duty: about US$660 here. That makes roughly US$3,960 before destination port and handling charges and the broker's fee, typically a few hundred dollars per entry, and inland delivery. Only that final total is comparable with a DDP number, and only once you have confirmed the DDP quote includes import VAT. The landed-cost calculator works out the duty and tax lines for the UK, EU, Canada, Australia and the US; a forwarder supplies the freight.

From the same supplier the DDP figure is larger because it covers more of the journey; whether you pay more in total depends on who buys freight, clearance and delivery more cheaply. In the article's example, 500 cotton tees at US$5.40 FOB comes to US$2,700, and that sum still has to carry freight and insurance, port charges, a broker's fee, any duty, import tax and delivery. A small brand shipping a few hundred kilos pays one-off rates on its own, while a seller shipping the same lanes regularly can consolidate cargo and get better terms. There is also a cost that appears on neither quote: your time chasing separate invoices, and the chance of a surprise charge after the goods land. Compare on landed cost rather than the headline figure, and a DDP quote is often at or below FOB plus its extras, with far fewer unknowns.

Ask every supplier the same seven questions, so the numbers rest on one basis. Which Incoterm, and to where: DDP to which address, or FOB from which port? Is import VAT or GST inside the price, or is the quote duty paid and tax excluded? In whose name is the import entry filed, since that decides whether you can recover the VAT? What fabric exactly: composition, weight in GSM, and whether the rib carries elastane, because a cheaper quote is often a lighter fabric. What do sampling and bulk each cost, and how long does each take, quoted as separate lines? What is the minimum per colour, given that two colours usually means two minimums (ours is 150 pieces per style and per colour)? And who actually makes the garment? Ask for the factory's address and a live video call from the floor, because an agent's quote adds a margin and one more party between you and the maker.

Five things on a garment quote should prompt a question before you sign. A price described as landed that shows no duty or tax line. A DDP quote that leaves out import VAT or GST without saying so, leaving you an unbudgeted tax bill. A fabric described only as premium cotton, with no composition or GSM weight, which leaves room for a lighter cloth than you expected. A lead time with no sampling stage, which usually means the figure covers bulk production only. And a quote from a company that will not name the factory making your garments. None of these proves a supplier is dishonest; each is a question you would otherwise be asking later, when changing course costs more. A company that will not name its factory is also one you cannot visit or call from the floor, so ask before you pay. Our guide to avoiding manufacturer scams covers the deliberate cases.

Usually not: for most small brands importing clothing, an EXW quote ends the seller's obligations at the factory door and makes every step after that, including export clearance in Bangladesh, yours. The ICC Academy notes that EXW is often most practical for domestic trade, and that a buyer unable to complete export formalities in the seller's country should consider FCA instead. In practice, EXW means finding a forwarder who can collect from the factory, handle the export declaration and move the goods to port, all in a country where you have no presence. Risk also passes to you at the factory, so anything that goes wrong on the road to the port is your problem to claim for. If a supplier will only quote EXW, ask for FCA or FOB at minimum, so export clearance sits with them. Better still, ask for DDP to your address, which is how we quote.

It depends on where the goods land. In the UK and the EU the customs value includes transport and insurance up to the place where the goods enter the country: HMRC's guidance says so for the UK, and Article 71 of the Union Customs Code for the EU. Duty is then worked out on that figure. For clothing made in Bangladesh this rarely shows up as duty in those markets, because the UK's Developing Countries Trading Scheme and the EU's Everything But Arms arrangement set the rate at zero when origin is proved, but import VAT is still charged on a value that includes the freight. The United States works the other way: its transaction value excludes international transport and insurance, so duty is charged on a value close to the FOB price. Either way, the freight invoice belongs in your landed cost, and your broker can confirm the value used on the entry.

Because several lines between an FOB price and a landed cost are charged per shipment or per customs entry, not per piece. A customs broker charges per entry, and destination port handling and inland delivery are billed per shipment or per container, whether the cartons hold 150 garments or 1,500. Divide one of those charges by the pieces in the order and the share each garment carries falls as the quantity grows: at 1,500 pieces it is a tenth of what it is at 150. Duty and import VAT behave differently. They are rates on the customs value, so they stay the same share of that value whatever the size of the order. That is why a landed cost should be worked out for your own quantity and lane rather than copied from a figure per piece someone else was quoted. It is also why some brands fly a small first run, then ship larger reorders by sea.