What an Incoterm actually decides
Incoterms are standard trade terms published by the International Chamber of Commerce. Each one sets out who arranges and pays for transport, who insures the goods, where risk passes from seller to buyer, and who clears customs at each end. They do not set the price or the payment terms, which are agreed separately.
The terms clothing buyers meet most often
Strictly, FOB and CIF are designed for sea freight. For containerised and air shipments, FCA and CIP are the closer equivalents, and a forwarder may suggest them.
- EXW, ex works: the buyer collects from the factory and handles everything after that, including export clearance. Rarely the simplest choice for an overseas buyer.
- FOB, free on board: the seller delivers the goods, cleared for export, on board the vessel at the named port of origin. The buyer pays the sea freight and everything after.
- CFR and CIF: the seller also pays the main freight to the destination port, and with CIF the minimum insurance. Risk still passes at the origin port.
- DAP, delivered at place: the seller delivers to a named destination, but the buyer clears import customs and pays duty and taxes.
- DDP, delivered duty paid: the seller delivers to the named place with import duty and taxes paid, carrying the most cost and responsibility.
FOB or DDP for a clothing order
FOB gives you control. Your own forwarder books the freight, your broker classifies the goods and you see every cost. It is usually the cheaper route for buyers who import regularly, and it keeps the duty relationship with your own customs authority.
DDP gives you simplicity. One price covers the garment, freight, duty and delivery, which is attractive for a first order. The catch is that someone must legally act as importer in your country, and the duty rate the seller assumed becomes part of your price. Ask how the seller imports, which rate they used and what happens if the classification is challenged.
How to compare two quotations
Two prices on different terms are not a comparison until you adjust them.
- Convert both to the same term by adding the missing costs to the cheaper looking one.
- Check the named place: FOB Karachi and DAP London are very different deliveries.
- Confirm who insures the goods while they are at sea.
- Ask which documents the seller prepares, such as the commercial invoice, packing list and certificate of origin.
How TextileWays quotes
Quotations are prepared on recognised Incoterms, so responsibility for freight, insurance, duty and clearance is clear from the start. Tell us your preferred term and destination, and where you have a nominated forwarder, we work with them.
