EXW, FOB and DDP: Where Risk Moves in a Knitwear Order

Every knitwear quotation ends with a three-letter trade term, and that term decides more than the freight line. EXW, FOB and DDP each fix a different handover point, a different risk line and a different set of paperwork. The garment price barely moves between them. The total cost, the paperwork and who is exposed when something goes wrong all do.

What does a trade term actually decide?

An Incoterm allocates three things and only three: cost, risk and paperwork. It does not set the garment price or the payment schedule. Two buyers can hold the same FOB Yantian unit price and face very different totals, depending on their forwarder and their address. The price per piece is one column; the trade term beside it is the other. That second column is the Incoterm field in an RFQ.

Where does each term hand over, and when does risk move?

Four columns, three terms. The third column is the one that turns into an invoice from someone other than us.

Term	Where the factory’s responsibility stops	What the buyer takes on	When risk passes
EXW, our factory	Goods packed and made available at the factory door in Dongguan	Loading, inland trucking, the Chinese export declaration, export documents, terminal handling, ocean freight, marine insurance, import clearance and duty	When the goods are made available at the factory
FOB Shenzhen, Yantian	Goods delivered on board the vessel at Yantian, already export cleared	Ocean freight, marine insurance, destination charges, import clearance and duty, onward delivery	When the goods are on board at Yantian
DDP, named address	Goods delivered to the address on the quotation, import cleared, duty and taxes paid	Unloading at that address, and anything beyond it	On arrival at the named address, ready for unloading

Read the last column first. Under EXW the goods are yours, and at your risk, while still on a Chinese road. Under FOB the split falls when the goods are on board. Under DDP nothing splits until the address on the quotation.

What does EXW leave with the buyer?

EXW is the shortest obligation on our side and the longest on yours. The price covers the garment and its packing and stops at our door. Everything after belongs to the buyer: loading, inland trucking from Dongguan to the port, terminal handling, the ocean leg, marine insurance and import clearance.

Two items on that list are easy to miss. Under EXW the buyer is the exporter of record in China, which in practice means holding a Chinese trading entity or appointing an agent who can file the declaration; a forwarder asked for a door-to-door price will build that service back into the rate. The other is documentation: export invoice, packing list, declaration, and a certificate of origin where the destination asks for one. None of it is inside the garment price, and one declaration serves 100 pcs or 10,000 pcs at much the same fixed effort.

There is a cost that never appears on a quotation: risk leaves with the goods at the factory gate, so cartons waiting for a booking are uninsured.

What does FOB Yantian cover, and where does it stop?

FOB Shenzhen, named port Yantian, moves the handover to the vessel. We truck the cartons to the terminal, declare the export in our own name, and deliver the goods on board. At that point our cost and our risk both stop.

What stays with the buyer is the booking, the ocean freight, marine insurance, destination charges, import clearance and duty. The booking has to be in the buyer’s name before we can deliver against it. Our documents feed it: the packing list and carton marks and the commercial invoice are what the bill of lading is built from. Our own 100% inspection runs before the cartons are closed, with finished cartons sampled to AQL 2.5 for major defects.

FOB is narrower than it sounds: not delivery to a forwarder’s warehouse in Shenzhen, not delivery to a destination port. The named port and the on-board point are the whole term, and a missed terminal cut-off moves the shipment.

What does DDP add, and what does it still need from the buyer?

DDP carries the obligation to the other end. We deliver to the named address, cleared for import, with duty and taxes paid on our side. The buyer’s risk begins when the goods arrive at that address, ready for unloading.

A DDP price is address-specific, so a quotation needs the full delivery address and postcode, whether the site takes a tail-lift or a booked delivery slot, and the importer details the destination requires. The customs entry also needs a precise description per style: fibre content, knit construction, garment type and quantity. A country is not a destination for pricing purposes.

Two things stay with the buyer even under DDP: unloading at the address, and anything beyond it. DDP is not a discount either; it is the same garment with more of the route carried by us.

Which term fits a first order?

Match the term to the paperwork you can already do.

• You have a forwarder and an importer entity: FOB Yantian, the most comparable price between factories since the unit price for 500 pcs excludes freight.
• You have neither: DDP to a named address. Someone has to hold the import entry, and on a first order that is rarely the buyer.
• You have a Chinese agent who can declare export: EXW, and only then. Without that agent, the saving on an order of 100 pieces becomes a cost paid elsewhere.

On a first run of 100 pieces per style and colour, the paperwork is the larger variable. A declaration and an import entry carry a fixed cost that does not shrink with the carton count, so two buyers ordering 100 pieces each can see very different totals. The minimum order quantity sets the run; the term sets what follows.

Which trade terms appear on our quotation?

Three: EXW factory pickup in Dongguan, FOB Shenzhen Yantian, and DDP to a named address. Those are the only trade terms we price.

Marine insurance sits outside all three. The buyer arranges cover against the cargo value, which keeps the insured amount matched to what is actually loaded. Terms that bundle carriage and marine insurance into one seller price are not on our quotation.

How do payment terms sit against the trade term?

Two separate lines answer two different questions. The trade term decides who pays which carrier and who carries the risk at each point; the payment term decides when the invoice is settled.

Our payment terms are the same whatever the trade term: T/T with a deposit on order and the balance before shipment, or an L/C at sight for a full container. The balance falls due before the goods leave, so choosing DDP does not push the payment date later; it changes the invoice total. Where the calendar is tight, production is usually the longer block: bulk runs 15–25 days from written PP sample approval, after a sample stage of 3–7 days. The clothing production timeline sets out that sequence, and the production lead time calculator turns it into a ship date.

What do buyers get wrong most often?

• EXW read as the cheap option. It is the lowest number on the quotation and the most work for the buyer.
• FOB read as delivered. It stops on board at Yantian, not at a warehouse and not at the destination port.
• DDP read as no paperwork. The buyer still supplies the address, the importer details and the unloading.
• Cost and risk read as one line. Under EXW risk leaves at the factory gate, under FOB it leaves on board, under DDP it stays with us to the door.

Before any of it, the sample has to be signed, and the sample approval checklist is where the specification the invoice describes gets fixed. A trade term describes movement, not conformance.

What do buyers ask most about EXW, FOB and DDP?

Does FOB include delivery to my warehouse?

No. FOB Shenzhen Yantian ends when the goods are on board at Yantian. Ocean freight, marine insurance, destination charges, import clearance and the final leg to your warehouse all sit with you. If you want the goods at your door, ask for DDP to that address.

Is EXW the cheapest option in total?

Rarely. EXW is the lowest line on the quotation, but loading, inland trucking, the Chinese export declaration and the export documents are all yours, and a forwarder will price them back in. Add uninsured cartons sitting in a Chinese yard and the gap tends to close or reverse.

Can you quote DDP to any address?

Yes, with the full address, postcode and delivery conditions. DDP is priced per destination and per order rather than per country, and the customs entry needs a precise description of each style. Tell us whether the site needs a tail-lift or a booked slot, and who the importer of record is.

Who arranges marine insurance?

The buyer, under all three terms we quote. Cover is arranged against the cargo value, which keeps the insured amount matched to what is actually loaded and lets the buyer extend the policy to the rest of the route. We supply the commercial invoice and packing list the policy is written against.

When does risk pass if the goods are damaged in transit?

Under EXW at our factory door, before loading. Under FOB when the goods are on board at Yantian. Under DDP at the named address, ready for unloading. Damage in the terminal before loading is ours under FOB; damage after loading sits with the buyer, whichever carrier is at fault.

Do payment terms change with the trade term?

No. T/T with a deposit on order and the balance before shipment applies to all three, and a full container can run on an L/C at sight instead. The trade term changes the invoice total and who pays each carrier, not when the balance falls due.

SLSPOLO has made knitwear in Dongguan since 2009, across 18,000+ m² with 180+ staff and a monthly capacity of 150,000–200,000 pcs, under ISO 9001. The minimum is 100 pcs per style and colour, and 200 pcs for bonded and seam-sealed styles. Send the destination and the term with your RFQ, or contact us and we will quote all three.