EXW, FOB or DDP? Incoterms for Knitwear Buyers Explained

By YZR Sweaters · 2026-09

Most sourcing problems blamed on price are really problems of scope. Two sweater quotations that look far apart may be quoting different halves of the same journey. Incoterms remove that ambiguity, and reading them properly is cheap risk control.

What are Incoterms, and what do they actually govern?

Incoterms are the international commercial terms published by the International Chamber of Commerce (ICC). These three-letter codes — FOB, CIF, DDP and the rest — allocate responsibility between buyer and seller for carriage, insurance, export clearance, import clearance, duty and tax, and the point where risk transfers.

Two limits matter. Incoterms say nothing about price, payment method, currency or title — those belong in the contract of sale. And the rules are revised periodically, so a contract should name the version it uses.

The terms knitwear buyers actually meet

EXW — Ex Works

The seller makes the goods available at their premises and risk transfers there; even loading is not always included. The buyer handles pickup, inland transport in China, export declaration, freight, insurance, import clearance and duty.

FOB — Free On Board

The seller delivers on board the vessel at the named port, handling inland transport, export clearance and loading. Risk transfers once goods are on board; the buyer arranges ocean freight, insurance, import clearance and duty.

CFR — Cost and Freight

Everything FOB covers plus ocean freight to the destination port. Risk still transfers on board at the port of shipment — the point most buyers miss, because cost and risk part company. The buyer arranges its own insurance, import clearance and duty.

CIF — Cost, Insurance and Freight

CFR plus marine insurance arranged by the seller. Risk again transfers at the port of shipment. The buyer handles import clearance, duty and any cover beyond the modest minimum the rule requires.

DAP — Delivered At Place

The seller delivers to a named destination ready for unloading, and risk transfers there. The buyer handles import clearance and duty — awkward without a local broker, since goods can arrive before clearance is arranged.

DDP — Delivered Duty Paid

The seller delivers with import clearance and duty already handled, and risk transfers at destination duty paid. The buyer mainly receives the goods — but read the caution below.

Why is FOB the default for sweater orders?

FOB splits the journey where each party has most control: the Chinese supplier handles inland transport and export declaration, which depend on local systems, while the buyer negotiates freight and insurance based on its own volumes and destination. It also makes quotations comparable, since every supplier quotes the same scope and a price difference reflects the garment rather than the logistics.

What are the hidden costs of EXW?

EXW looks cheapest because the seller's scope is smallest, but the buyer inherits the export declaration in China (goods must still be cleared, and a buyer with no Chinese entity may struggle to arrange it), inland transport and port charges at rates above the factory's own, and a risk window that opens at the factory gate. Export documentation and VAT treatment can also depend on who is exporter of record. EXW suits experienced buyers with a China-side operation; for a first order it turns a simple arrangement into a complicated one.

Why is DDP attractive, and where does it go wrong?

DDP removes almost every logistics task from the buyer's desk, which is why it gets recommended so often. The problems are structural. DDP needs the seller to act as importer of record at destination, generally through a local entity or broker that may be subcontracted and opaque. The price blends garment, freight, insurance, clearance and duty into one number, so without the duty rate for your product you cannot judge whether it is good. Customs valuation also sits with someone else, yet buyers answer for the accuracy of declarations made on their behalf. And overpaid duty or returned goods are harder to reclaim when you were never the importer. DDP can be right for small trial orders and buyers with no import function — never as a default, and never without knowing the duty component.

How do you choose the right term for your order?

Four questions decide it. What can your team do? Without a forwarder, broker and duty account, DAP or DDP may be realistic; with all three, FOB gives the best control. How big is the order? Freight negotiation rewards volume, so term differences are small on trial orders and material on full containers. Where is it going? Destination rules, VAT recovery and de minimis thresholds change the arithmetic. And who controls the goods in transit? Under FOB, CFR and CIF you hold the bill of lading; under DDP the seller keeps control until delivery. A sensible path for a first order: quote FOB, learn your real landed cost from your forwarder, then decide whether a delivered term would be simpler — see our importing sweaters from China guide.

How do you compare quotations on different terms?

Never compare headline numbers across terms. Convert every offer to one basis — landed cost at your warehouse — by adding what the buyer bears: EXW plus inland transport, export clearance, freight, insurance, duty and clearance fees; FOB plus freight, insurance, duty and clearance; CIF plus duty, clearance and any cover above the minimum; DDP plus nothing, provided the price is genuinely all-in, which is what you verify. Ask every supplier for the same four things: unit price, term, named port or place, and what is excluded. Packing choices also change shipped quantity, so check volumes against a realistic plan — our notes on sweater packaging and shipping explain how.

What belongs in the contract and the order?

Name the exact term and ICC version — FOB Shenzhen, Incoterms 2020, never "FOB" alone. Name the port or place, since Shenzhen and Ningbo are real money apart on inland trucking. Add a cost inclusion list covering terminal handling, documentation, loading and peak-season surcharges, and state who insures, at what percentage of value and against which risks. List the documents the seller must provide — commercial invoice, packing list, bill of lading or waybill, and certificate of origin where applicable. Record the buyer's obligations, because under DAP and DDP slow clearance leaves goods at the terminal at your cost. Settle all of it before production starts: a term agreed late is a term agreed under pressure.

Frequently asked questions