FOB vs DDP for clothing imports: which should you choose?

In short

Choose FOB if you have a freight forwarder and want control: the supplier loads your goods at Chattogram and you pay freight, duty and import VAT in your own name. Choose DDP for a first small order without a forwarder: one delivered, duty-paid price, but check the duty rate, importer of record and VAT it assumes.

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FOB means the supplier’s job ends when your goods are loaded on the ship at the port of export; you book the freight, clear customs and pay the duty. DDP means the supplier delivers to your door with duty paid, so one price covers almost everything. FOB gives you control, visible costs and the import VAT in your own name. DDP gives you simplicity at the price of trusting someone else’s duty and tax assumptions. For a first small order with no freight forwarder, DDP is usually the easier start; once you ship regularly, FOB is usually cheaper and clearer.

What do FOB and DDP mean under Incoterms 2020?

Both are rules from Incoterms 2020, the set of 11 trade terms published by the International Chamber of Commerce (ICC). A term tells the buyer and seller three things: who pays for each leg of the journey, who does the customs formalities, and at what point the risk of loss or damage moves from seller to buyer. It does not set the price, transfer ownership or say when you pay. Those belong in the sales contract.

FOB (Free on Board), named port of loading. The seller clears the goods for export and delivers them on board the vessel you nominate. Risk passes to you once they are on board. FOB is one of the four rules meant only for sea and inland waterway transport, so it is written as “FOB Chattogram”.
DDP (Delivered Duty Paid), named place of destination. The seller carries the goods to the place you name, clears them for import, pays the duties and taxes, and bears the risk until they are ready for unloading there. It works for any mode of transport and is written as “DDP” plus your warehouse address.

Garment suppliers in Bangladesh also use “FOB” as shorthand for a full package price, which is a different idea: a production model, not a shipping term. Our guide to FOB, CMT and full package production covers that meaning. This article is about the shipping term only.

Gloved hands lifting a plain brown carton from a white delivery van toward the open green back door of a boutique stockroom

Who pays and who carries the risk at each step?

The quickest way to see the difference is to walk one shipment of t-shirts from a factory near Dhaka to a warehouse in Manchester or New Jersey.

Step	Under FOB Chattogram	Under DDP your warehouse
Trucking from factory to port	Seller pays; seller’s risk	Seller pays; seller’s risk
Export customs clearance in Bangladesh	Seller	Seller
Loading on board the vessel	Seller; risk passes to you once on board	Seller; risk stays with the seller
Ocean freight and transshipment	You book and pay, usually through your forwarder	Seller books and pays
Cargo insurance	Your choice and cost	Seller’s risk, so seller’s choice
Destination port and terminal charges	You	Seller
Import declaration and customs broker	You, as importer	Seller, or the seller’s agent
Import duty	You	Seller
Import VAT or sales tax	You, and you can normally reclaim it if VAT-registered	Seller, unless the contract excludes it
Delivery to your door	You	Seller; unloading is yours

Notice that under FOB the risk moves to you in Bangladesh, weeks before you see the goods. If a container is dropped at the transshipment hub, the claim is on your insurance, not the factory’s. That is why FOB buyers insure the cargo themselves on wider terms than the legal minimum.

Why the same shipment has a different customs value in each market

Duty is a percentage of the customs value, and markets do not agree on what that value includes. This matters for FOB buyers checking their own numbers and for anyone checking a DDP quote.

United States. U.S. Customs and Border Protection values goods on the price paid, excluding international freight, insurance and other CIF charges. The FOB price is therefore close to the base for duty.
United Kingdom. HMRC adds freight, insurance, loading and handling up to the point where the goods enter the UK. Duty is charged on roughly the CIF value.

Import VAT in the UK is then calculated on the customs value plus duty plus the incidental costs up to the goods’ first destination in the UK, such as clearance charges, handling and onward transport. So freight increases the VAT bill even when duty is zero. The landed cost calculator works this through for each market.

A worked landed-cost comparison (illustrative figures)

Every figure below is invented to show the arithmetic. None is a quote from us or from any supplier or forwarder. Replace them with your own quotes.

The order: 2,000 cotton t-shirts shipped by sea to the UK. FOB price USD 4.00 each, so USD 8,000 of goods. Assumed forwarder quote for ocean freight and insurance: USD 700. Destination port charges and customs broker: USD 400. Delivery to your warehouse: USD 250. Cotton t-shirts fall under commodity code 6109 10 00 10, which carries a 12% UK third-country duty and 0% for Bangladesh under the Developing Countries Trading Scheme, but only with a valid origin declaration.

Line (USD)	FOB, origin proof correct	FOB, origin proof missing	DDP quote
Goods at FOB price	8,000	8,000	Included
Freight and insurance	700	700	Included
Customs value (goods plus freight to the UK)	8,700	8,700	Seller’s calculation
Duty	0 (0%)	1,044 (12%)	Included
Port charges and broker	400	400	Included
Delivery to warehouse	250	250	Included
Total before VAT	9,350	10,394	9,900 (4.95 each, assumed)
Per piece before VAT	4.68	5.20	4.95

Three things come out of this. First, when everything goes right, FOB is cheaper: in this example DDP costs USD 550 more, about 6%, which is what the convenience and the seller’s risk cost. Second, a single missing origin statement costs more than that difference. Under FOB that mistake is yours; under DDP the seller who promised a duty-paid price has to absorb it, which is part of what you are paying for. Third, the DDP figure tells you nothing about VAT until you ask.

Want the landed cost for your market?

We quote FOB, CIF or DDP and ship from Chattogram by sea or Dhaka by air. Tell us your market and quantity and we include shipping in the quote.

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What a DDP price can hide

DDP is the simplest term to buy and the easiest to get wrong. Before accepting one, ask these questions.

Which commodity code and duty rate did you use? A DDP price built on 0% duty is only safe if the origin proof is right. If the seller used the wrong code, the importer of record answers to customs later.
Who is the importer of record? Under DDP the seller, or an agent acting for it, should be declared as importer. The ICAEW, the accountants’ professional body, warns that many DDP imports are wrongly declared with the buyer as importer, which muddles who owes what.
Is import VAT included? HMRC’s rule is that only the owner of the goods can recover import VAT, and it has flagged cases where the importer of record claimed VAT it did not own. If a seller pays UK import VAT under DDP and passes the cost to you inside the price, you may be paying 20% you cannot reclaim. Many buyers ask for “DDP, VAT unpaid”, or simply choose DAP, where the seller delivers but you clear the goods.
Can the seller legally clear goods in your country? The ICC’s own guidance says that if the seller cannot or will not manage import clearance in the destination country, DAP is the more suitable rule.
What happens to demurrage and storage if the goods are held at the port because paperwork is missing?

When FOB is the better choice

You already have a freight forwarder, or you are ready to appoint one and compare its quotes.
You ship full containers or regular LCL loads, where your own freight contract is usually cheaper than a supplier’s marked-up rate.
You are VAT-registered in the UK or EU and want the import VAT recorded in your name so you can reclaim it.
You import into the US, where duty is charged on a value that excludes international freight, so the FOB price is close to your duty base and easy to check. Rates and the additional tariffs that apply now are on our page for US brands.
You want one forwarder to consolidate goods from several suppliers.

One refinement: for containers the ICC recommends FCA rather than FOB, because a container is handed to the carrier at the terminal days before it is loaded. The garment trade still quotes FOB, so agree in writing when your forwarder takes the container over. Our shipping and logistics page explains how that handover works from Chattogram.

When DDP is the better choice

It is your first order and you have no forwarder or customs broker.
The order is small enough that setting up your own import costs a large share of the goods’ value.
You sell online and need a single landed price per piece to set retail prices quickly.
You are not VAT-registered, so reclaiming import VAT is not an option either way.

Even then, treat DDP as a stage rather than a permanent arrangement. The duty and VAT rules for your market do not change because someone else fills in the forms, and learning them on a small order is cheaper than on a large one. The page for UK brands sets out the UK duty and origin position in full.

What to write into the contract, whichever term you use

The term with its version and a named place: “FOB Chattogram, Incoterms 2020” or “DDP [full warehouse address], Incoterms 2020”.
The commodity code for each style and the duty rate assumed in the price.
Who provides the proof of origin, in which form, and by when.
Insurance: who buys it and on what cover.
For DDP, who is importer of record, and whether import VAT is included.
For FOB, the date and place your forwarder takes the goods over.

What to do next

Run both routes through the landed cost calculator with your own freight and duty figures, then compare the result with any DDP price you have been offered. If the gap is small, DDP may be worth it for a first order. If it is large, ask what it covers. When you are ready, send us your styles, quantities and delivery address and we will quote FOB, CIF or DDP side by side; ask your customs broker to confirm the commodity code and duty rate for each style.

Questions buyers ask.

What does FOB mean in clothing manufacturing?

FOB, or Free on Board, is an Incoterms 2020 rule under which the supplier clears the garments for export and loads them on board the vessel at the named port, such as Chattogram, and the risk passes to you once they are on board. From that point the ocean freight, cargo insurance, destination charges, import clearance, duty, import VAT and delivery to your door are yours. Because the risk moves to you in Bangladesh, weeks before you see the goods, insure the cargo yourself. FOB is one of the four Incoterms rules meant only for sea and inland waterway transport, so a correct contract names the port: FOB Chattogram, Incoterms 2020. For containers the ICC recommends FCA instead, because the container is handed over at the terminal days before loading; agree in writing when your forwarder takes it over. Suppliers in Bangladesh also use FOB to mean a full package price, a production model rather than a shipping term.

Is DDP more expensive than FOB?

The DDP price is always higher than the FOB price for the same goods, because it includes freight, insurance, customs clearance, duty and delivery that FOB leaves to you. The fair comparison is DDP against your own landed cost under FOB. When a buyer has a forwarder and ships regularly, the FOB route is usually cheaper, because the seller adds a margin and a risk allowance to every cost it carries for you. When a buyer is new, has no forwarder and orders small quantities, DDP can be close to or even below what the buyer would pay arranging each step alone, since the seller may buy freight and clearance at better rates. Ask for the DDP price broken into goods, freight, duty and fees, then price the same lines yourself. That shows exactly what the convenience costs.

Who pays import VAT under DDP shipping?

Under DDP the seller is responsible for import duties and taxes, which normally includes import VAT, unless the contract says otherwise. That creates a problem for VAT-registered buyers. In the UK, HMRC’s position is that only the owner of the goods at import can recover import VAT, so VAT paid by an overseas seller and built into your price may be a cost you cannot reclaim, while VAT you pay as importer usually can be reclaimed on your return. Sellers handle this in different ways: some register for VAT in your country, some use an agent, some quote DDP with VAT excluded and let you account for it. Ask the seller in writing who will be declared as importer, whether VAT is included, and which document you will receive as evidence. If the answers are vague, choose DAP or FOB and clear the goods yourself.

What does DDP mean when importing clothing from Bangladesh?

DDP, or Delivered Duty Paid, is an Incoterms 2020 rule under which the seller carries the clothing to the place you name, clears it for import, pays the duties and taxes, and bears the risk until the goods are ready for unloading there; unloading is yours. Unlike FOB, it works for any mode of transport, and it is written as DDP followed by your full warehouse address and Incoterms 2020. One price covers almost everything, which is why DDP suits a first small order without a freight forwarder. The trade-off is that you rely on the seller’s assumptions about the commodity code, the duty rate and import VAT, so ask for them in writing before you accept the price.

Is FOB or DDP better for a first clothing order from Bangladesh?

For a first small order with no freight forwarder or customs broker, DDP is usually the easier start; once you ship regularly, FOB is usually cheaper and clearer. DDP also suits orders small enough that setting up your own import would cost a large share of the goods’ value, online sellers who need one landed price per piece, and buyers who are not VAT-registered. FOB suits buyers who have a forwarder, ship full containers or regular LCL loads, want the import VAT in their own name to reclaim it, or want one forwarder to consolidate several suppliers. Treat DDP as a stage rather than a permanent arrangement: the duty and VAT rules for your market do not change because someone else fills in the forms, and learning them on a small order is cheaper than on a large one.

Who should be the importer of record when clothing is shipped DDP?

Under DDP the seller, or an agent acting for it, should be declared as the importer of record, not the buyer. The ICAEW, the accountants’ professional body, warns that many DDP imports are wrongly declared with the buyer as importer, which muddles who owes what. It matters because the importer of record answers to customs later if the seller used the wrong commodity code, and a DDP price built on 0% duty is only safe if the origin proof is right. Before you accept a DDP price, ask in writing who will be declared as importer, which commodity code and duty rate the price assumes, whether the seller can legally clear goods in your country, and what happens to demurrage and storage if the goods are held at the port because paperwork is missing.

What is the difference between DDP and DAP for clothing imports?

Under DAP the seller delivers the clothing to your named place but you clear the goods through import customs yourself; under DDP the seller also clears them for import and pays the duties and taxes. Many buyers choose DAP, or ask for DDP with VAT unpaid, because of import VAT. HMRC’s rule is that only the owner of the goods can recover import VAT, so if a seller pays UK import VAT under DDP and passes the cost to you inside the price, you may be paying 20% you cannot reclaim. The ICC’s guidance says that if the seller cannot or will not manage import clearance in the destination country, DAP is the more suitable rule. Whichever you choose, write the term, its version and the named place into the contract.

How are UK duty and import VAT worked out on clothing shipped FOB from Bangladesh?

In the UK, duty is charged on roughly the CIF value, because HMRC adds freight, insurance, loading and handling up to the point where the goods enter the UK to the price of the goods. Import VAT is then calculated on that customs value plus the duty plus incidental costs up to the goods’ first destination in the UK, such as clearance charges, handling and onward transport, so freight increases the VAT bill even when duty is zero. Cotton t-shirts under commodity code 6109 10 00 10 carry a 12% UK third-country duty and 0% for Bangladesh under the Developing Countries Trading Scheme, but only with a valid origin declaration. The US works differently: CBP values goods on the price paid, excluding international freight and insurance, so the FOB price is close to the duty base.

What happens if the origin declaration is missing on a UK clothing shipment from Bangladesh?

Without a valid origin declaration, Bangladeshi cotton t-shirts lose the 0% rate under the UK’s Developing Countries Trading Scheme and pay the 12% third-country duty. In the guide’s worked example, whose figures are invented and are not a quote from us or from any supplier, 2,000 t-shirts with a customs value of USD 8,700 would pay USD 1,044 of duty, more than the USD 550 by which the example’s assumed DDP quote exceeds the FOB route with correct origin proof. Under FOB the mistake is yours to pay; under DDP the seller who promised a duty-paid price has to absorb it, which is part of what you pay for. Whichever term you use, write into the contract who provides the proof of origin, in which form and by when, and the commodity code and duty rate assumed for each style.

What should I write into the contract when buying clothing FOB or DDP?

Write the Incoterm with its version and a named place, such as FOB Chattogram, Incoterms 2020, or DDP followed by your full warehouse address and Incoterms 2020. An Incoterm does not set the price, transfer ownership or say when you pay, so those belong in the sales contract as well. Add the commodity code for each style and the duty rate assumed in the price, who provides the proof of origin, in which form and by when, and who buys the cargo insurance and on what cover. For DDP, state who is the importer of record and whether import VAT is included. For FOB, state the date and place your forwarder takes the goods over, which matters for containers handed to the carrier at the terminal days before loading.

Sources

Checked 5 November 2026. Rules and figures change, so confirm anything that affects your pricing.