If you don’t understand how pricing terms like FOB, DDP, and LDP affect your costs, you could get hit with surprise fees when importing your apparel – like 37.5% duty!

What Do FOB, DDP, and LDP Mean?

The most common types of pricing are FOB (Freight on Board) and DDP (Delivered Duty Paid) / LDP (Landed Duty Paid). DDP and LDP are essentially the same thing, just different names.

These terms define who is responsible for what in the production and shipping process – from the moment your goods leave the factory to when they arrive at your warehouse.

The diagram below shows the steps involved depending on what pricing you opt for.

FOB Pricing (Freight on Board)

FOB pricing means your factory is only responsible for making your garments and getting them to the port. Once they’re on the ship, it’s all on you – from freight, customs, and duties to delivery to your warehouse.

Here are the additional expenses to consider:

• Boat Freight: This is the standard (most economical as opposed to air) method of transport (and can take anywhere between 15-45 days depending on port locations) from the overseas port to the US port.
  
  I’m sure you’ve heard the saying “slow boat from China”…well, it’s true, and if getting FOB pricing, you’ll need to include boat freight (as well as the time it takes to transport) in your budget and product plan. If you want to air product in (on a plane), you’ll have to pay an additional $0.50-$1.50USD per piece (depending on size / weight) so while you may get your product sooner, it sure will cost you.
  
• Inland Freight: Once it’s arrived stateside, the product still needs to get from the US port – i.e. Los Angeles to your warehouse or office. This will be a separate expense in addition to boat freight.
• Duty: To get products from overseas into the US, there are often duty rates that must be paid (depending on the COO – Country of Origin).  These can range from 0% to 37.5% (yes, very high!). That means an additional $3.75 could be added to a $10 product!
  
  How do you determine the rate? Each product type and content makeup has a unique HTS code, and duty rates vary based on import country. For example, cotton product has a lower duty rate than polyester, so if you ever see product that is 60% cotton / 40% polyester, it may have been done on purpose to save on duty (often known as CVC – Chief Value Cotton – meaning the majority of the product is cotton, thus receiving the lower duty rate for cotton).
  
  This HTS tariff codes finder + duty calculator is a quick way to see duty rates for various products.
  
• Insurance: In case anything happens to the product during transport, it’ll have to be insured. Yep, another added cost.
• Customs Clearance: Inspections can occur, and you may have to provide additional documentation to prove claims you’ve made about your product, for example that it really falls into the HTS duty category you are claiming (i.e. waterproof jackets have a lower duty rate than non-waterproof jackets, so if you’ve claimed this just to get the lower duty rate, you could be in trouble). I’ve seen a whole slew of problems getting products through customs and it can cause extensive delays in delivery.
• Freight Forwarders: If all of this sounds like a lot to handle, you can hire a freight forwarder (Expeditors is a well known one). They’ll help manage the process of getting your products into the U.S. It adds to your costs, but takes a big weight off your shoulders.

DDP / LDP (Delivered Duty Paid / Landed Duty Paid)

This pricing includes the costs to get it from the factory to your doorstep with all freight, duty, and insurance costs included. You don’t have to handle any of the process between the overseas port and your warehouse space. Instead, your factory pays for and manages all of this, and the extra expense to do that is built into the unit price they quote.

Which Pricing Model Should You Use?

• Choose FOB if:
  • You have a logistics team or freight forwarder
  • You want full control over shipping and import duties
• Choose DDP or LDP if:
  • You’re just starting out or don’t have time to manage shipping
  • You want a clear, predictable total cost with fewer logistics headaches

By default, many factories will quote FOB pricing so they aren’t the ones handling boat/inland freight, customs, duty, and insurance. However, you can ask for a product to be quoted as DDP or LDP. Not all factories are willing to do this however, as they don’t want to deal with it once it’s left their port, but it can be worth asking in case you’re net set up to handle everything.

Want More Help Understanding Apparel Production and Costs?

Check out my Ultimate Guide to the Garment Production Process to learn how sourcing, sampling, and manufacturing all work together. You can also read my Guide on How Much It Costs to Make a T-Shirt – featuring real quotes from 50+ manufacturers.