Incoterms are the shipping terms on every apparel quote, and most first-time buyers skip straight past them to the price. That's how a "cheap" quote becomes an expensive one. Here's what the three terms you'll actually see mean.
The three terms you'll actually be quoted
EXW (Ex Works). You collect the goods at the factory gate. The factory's responsibility ends at its door; you arrange pickup, export formalities, freight, insurance, duties and delivery. Lowest per-unit price, most work and risk for you. Fine for experienced importers, a trap for everyone else.
FOB (Free On Board). The factory delivers the goods to the port and pays export formalities and loading. From the port onward — ocean or air freight, insurance, destination duties, inland delivery — is yours. This is the apparel industry standard and the easiest way to compare quotes across factories, because everyone quotes FOB and the variable freight leg is yours to shop.
DDP (Delivered Duty Paid). The factory handles everything through to your door: export, freight, insurance, import duties, and final delivery. The quoted price is the price you pay. Highest per-unit price — the factory carries the cost of the whole chain and builds margin on it — but zero surprise costs and zero logistics work for you.
Why the spread is 15-25%
For apparel shipped from India or Southeast Asia to the US or EU, the difference between an EXW quote and a DDP quote is routinely 15-25% of per-unit cost. That's freight, insurance, duties, and the factory's handling margin. It's not padding — it's real cost being priced in by the party who now owns it.
The trap is comparing an EXW quote from one factory against a DDP quote from another and picking "cheaper." You're not comparing like with like.
What to ask before you sign
- Which Incoterm is this quote under — and can you quote it two ways?
- What's the port of loading and destination?
- Who owns the goods at each handoff (that's what the term defines)?
- Are duties and taxes included, and are you locked to an exchange rate?
Frequently asked questions about Incoterms
Which Incoterm should a small brand use?
Start with FOB — it's the industry standard for apparel, the easiest to compare quotes on, and you control the freight leg where you can actually shop for rates. Move to DDP once you've run a few shipments and want the factory to handle everything.
Why does the per-unit price change between EXW, FOB and DDP?
Each term moves responsibility (and cost) from the factory to you or vice versa. EXW is the cheapest per unit because you take the goods at the factory door. DDP is the most expensive because the factory covers freight, insurance, duties and delivery — and builds margin on all of it.
Is FOB or DDP better for avoiding surprise costs?
DDP eliminates surprises on the import side — the factory handles duties and delivery, so the price you're quoted is the price you pay. With FOB or EXW you own the freight and duty leg, which means you can shop it, but you also own the risk if you're new to it.
Related reading
- Apparel Labels & Hangtags — the other paperwork that ships with your goods.
- MOQs, Costing & Production Lifecycle — landed cost (per-piece + freight + duties) is the number these terms feed into.
- Sustainable Packaging for Apparel — the packaging that travels with the shipment.
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