I’ve manufactured hundreds of products overseas, and I’ve heard a lot of horror stories about fashion designers going broke trying to pay for unexpected costs. If you’re wondering how to import apparel to the US from other countries (China, Taiwan, India, etc), here are the essential steps you should be familiar with.
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Before you do anything, you’ll first want to know what type of pricing your factory is quoting. This will drastically affect how much the product actually costs and who’s responsible for what part of the import process.
The two most common types of pricing are FOB (Freight on Board) and DDP (Delivered Duty Paid) / LDP (Landed Duty Paid). The diagram below shows the steps involved depending on what pricing you opt for.
FOB Pricing (Freight on Board)
Most common, this pricing is the cost to manufacture the product and put it “on the boat” in the port in the country of manufacture. This quoted price gets the product no further than that port, so if you are getting FOB pricing from your manufacturer, you will also need to consider other expenses to get it to you as outlined below.
- 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.
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- Duty: To get product 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 – yikes! How do you determine the rate? Each product type and content make up 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: Getting product through customs can go smoothly…but this is not always the case. 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 product through customs, it’s not always pretty and it can cause extensive delays in delivery.
- Freight Forwarders: If all of this sounds like a lot to handle, you can hire what’s called a freight forwarder (Expeditors is a well known one) which will help with the process of getting product into the states. It does cost, but this can often be an expense that you can’t afford to live without.
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.
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 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.
Bottom line? Make sure you know what type of pricing you’re getting from your factories as your total cost can vary quite a bit between FOB and DDP/LDP pricing. It may also make you think twice about overseas vs stateside manufacturing, as the cost can add up quite quickly depending on the quantity of product you are making.