A factory quote with "FOB Shenzhen" or "EXW factory" attached looks like a technical footnote, but it quietly answers three important questions: who arranges shipping, who pays for it, and who is responsible if the goods are damaged or delayed along the way. Getting this wrong doesn't usually blow up the deal — it shows up later as an unexpected invoice or an unclear liability dispute.
EXW (Ex Works) — the factory's job ends at the door
Under EXW, the factory's only responsibility is to have the goods ready for pickup at its own premises. Everything after that — loading, inland trucking, export customs, ocean or air freight, import customs, final delivery — is the buyer's responsibility and cost. EXW quotes look attractively low on paper, but they are the least complete number in the entire comparison; brands new to importing often underestimate how much work "everything after the factory gate" actually is.
FOB (Free on Board) — the most common middle ground
Under FOB, the factory handles loading the goods onto the vessel at the named port and clears export customs. Once the goods are on board, responsibility and cost shift to the buyer, who arranges and pays for ocean freight, insurance, import customs, and delivery from the destination port. FOB is the standard term in garment sourcing because it splits responsibility at a point both sides can verify — the ship's rail — and it is usually the easiest quote to compare apples-to-apples between suppliers.
DDP (Delivered Duty Paid) — maximum convenience, at a price
Under DDP, the factory or its freight forwarder handles literally everything — export, freight, import duties, customs clearance, and final delivery to the buyer's door. This is the highest-convenience option and the easiest to budget for as a single number, but that convenience is priced in, and the buyer has the least visibility into what is actually being charged at each step.
Why the choice matters more than it looks
None of these terms is inherently better — the right one depends on whether a brand has (or wants) its own freight forwarder and customs broker relationships. A brand with logistics experience often saves money under FOB by shopping freight rates directly. A brand ordering its first container, with no freight relationships yet, is often better off paying a bit more for DDP simply to avoid the learning curve on the first few orders.
The one mistake worth avoiding regardless of experience level: comparing an EXW quote from one factory against a DDP quote from another as if they were the same number. They are not — and the gap between them is exactly the cost of everything Incoterms exist to define.