Our first knitwear order: should we compare FOB or DDP quotes?
FOB and DDP prices are not comparable numbers. They divide cost, risk and paperwork differently, so put every quote on the same basis before you compare.
We are a new brand comparing three quotes for our first hoodie order. Two factories quote FOB Shenzhen, and one quotes DDP to our US warehouse. The DDP price looks high, but we are not sure what we are really comparing. How should we decide?
Main answer
Do not compare the numbers as they are. FOB and DDP are Incoterms rules, published by the International Chamber of Commerce, and they divide responsibilities very differently. Under FOB, the seller delivers the goods on board the vessel at the named port, and you take over the costs and risks from there. Under DDP, the seller bears the costs and risks of delivering to your named place, including import clearance and duties. A DDP price includes a whole set of costs that an FOB price leaves to you.
Build a landed-cost comparison
To compare fairly, estimate the landed cost of each FOB quote. That means freight from the port, insurance, import customs clearance, duties and any taxes, the broker's fees and delivery to your warehouse. Duty rates depend on the product's tariff classification and origin. A customs broker can help you estimate them, and that estimate is better than a guess. Then compare those totals with the DDP quote.
Check that FOB is really the right term. ICC's explanatory notes say FOB is for sea or inland waterway transport where goods are placed on board a vessel. They suggest considering FCA instead when goods are handed to a carrier before loading, for example at a container terminal. That is common for containerised garments, so ask your freight forwarder which term matches how your cartons will actually move.
What DDP changes for a new importer
DDP can be simpler for a first order, because the seller arranges more of the chain. But it also means the seller, or its agent, acts in your import process, and you see less of the cost breakdown. Ask a DDP supplier who will be the importer of record, how duties are calculated, and what happens if a shipment is held. Keep in mind that compliance duties for the product, such as US labelling rules for fibre content and origin under 16 CFR Part 303, still apply to the goods you sell.
Ask every factory the same questions
Send all three factories one request with the same style, quantity, size split, packing method and delivery terms. Ask each for an FOB price, and ask the DDP supplier for its breakdown. Confirm the Incoterms edition each quote refers to. Then the decision is about cost, risk and control, not about which number looks lower.
For a first order, the lowest headline price is often not the lowest landed cost. Compare totals, and choose the terms you can actually manage.
Sources and further reading
- ICC — Incoterms® 2020 rules
- ICC Digital Library — FOB explanatory notes (Incoterms® 2020)
- eCFR — 16 CFR Part 303, Textile Fiber Products Identification Act rules
Standards and rules are summarised from their published scope or official guidance. Use the current edition and confirm requirements for your market.
Three perspectives on this question
Purchasing perspective
I put every quote on a spreadsheet with the same rows: product price, freight, insurance, duty estimate, broker and delivery. The DDP line goes in as one total with its breakdown next to it. It usually ends the debate quickly.
Merchandising perspective
Timing matters as much as cost. I'd ask each supplier for a delivery date to our warehouse, not just an ex-factory date. A cheaper FOB route that arrives after the launch window is not cheaper for us.
QC perspective
Whatever the terms, I want the final inspection to happen before the goods leave the factory. Under DDP that point is easy to lose, so write the inspection and the right to hold shipment into the order.
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