When you place a wholesale apparel order, your manufacturer will quote you on shipping terms — typically FOB, CIF or DDP. These are internationally recognised Incoterms (International Commercial Terms) that define who is responsible for costs and risk at each stage of the shipment journey. Understanding them prevents expensive surprises when your goods are in transit.
FOB — Free On Board
FOB is the most common Incoterm in apparel manufacturing. Under FOB terms, the manufacturer is responsible for the goods until they are loaded onto the ship at the port of origin. From that point, responsibility transfers to you — the buyer.
Under FOB, you are responsible for: ocean freight costs, marine insurance, import customs clearance in your country, import duties and taxes, and delivery from your port to your warehouse.
FOB price means the manufacturer has included all costs up to loading on the ship. The freight cost you pay on top of FOB is called the "freight collect" charge.
FOB is typically the best option if you have an established relationship with a freight forwarder. You control the shipping and can often negotiate better freight rates than your manufacturer.
CIF — Cost, Insurance and Freight
Under CIF terms, the manufacturer is responsible for shipping costs and marine insurance to the destination port. You take responsibility from the moment the ship arrives at your port.
Under CIF, the manufacturer pays: ocean freight to your destination port, marine insurance for the voyage. You pay: import customs clearance, import duties and taxes, delivery from port to warehouse.
CIF is useful when you do not have a freight forwarder relationship and want the manufacturer to arrange shipping. The tradeoff is that the manufacturer's freight cost is often higher than what you could negotiate directly with a forwarder.
DDP — Delivered Duty Paid
DDP is the most comprehensive Incoterm for buyers. Under DDP, the manufacturer takes responsibility for the entire journey — including shipping, insurance, customs clearance and import duties — right to your warehouse door.
Under DDP, the manufacturer pays and arranges everything. You simply receive the goods at your warehouse. The manufacturer includes all these costs in their DDP price.
DDP is the simplest option for new buyers with no freight infrastructure. The tradeoff is cost — DDP prices are higher because the manufacturer builds in their freight and duty costs, often with a margin.
Which Incoterm Should You Choose?
- FOB — if you have a freight forwarder. Most cost-effective. Most control.
- CIF — if you want the manufacturer to arrange shipping but you handle customs yourself.
- DDP — if you want a fully landed, all-inclusive price with no logistics management required. Best for first orders and new buyers.
What is Included in FOB Price?
A manufacturer's FOB price includes: all production costs, export packaging, export customs clearance and loading onto the vessel. It does not include ocean freight, insurance, import duties or inland delivery at destination.
Import Duties and Taxes
Regardless of Incoterm, import duties and taxes are your responsibility as the importer (unless DDP terms are agreed). UK import duty on knitwear varies by commodity code — typically 12% for cotton knitwear under HTS heading 6110. VAT at 20% applies additionally. These costs must be factored into your landed cost calculation when assessing profitability.