Incoterms Guide for Knitwear Buyers

You get a quote: "$5.50 FOB Ningbo." Another supplier says "$7.20 CIF New York." Which is cheaper? What do you actually pay? Who is responsible if the ship sinks?

Incoterms (International Commercial Terms) define who pays for what, who bears risk, and where responsibility transfers from seller to buyer. This guide explains the most common Incoterms for knitted scarves and beanies — with real examples for importers.

1. What Are Incoterms?

Incoterms are standard trade terms published by the International Chamber of Commerce (ICC). They answer three questions for every shipment:

• Cost: Who pays for freight, insurance, customs, and local delivery?
• Risk: Who bears the loss if goods are damaged in transit?
• Transfer point: When does responsibility move from seller to buyer?

2. Most Common Incoterms for Scarves & Beanies

EXW — Ex Works

Meaning: Buyer picks up goods at seller's factory. Seller does nothing beyond making goods available.

Buyer responsibility: Everything — export clearance, main freight, insurance, import clearance, final delivery.

Best for: Experienced buyers with their own freight forwarder. Small shipments via courier (DHL, FedEx).

FOB — Free On Board

Meaning: Seller delivers goods onto the vessel at the named port of shipment (e.g., FOB Ningbo). Risk transfers when goods are on board.

Seller responsibility: Export clearance, delivery to port, loading onto vessel.

Buyer responsibility: Main freight, insurance, import clearance, final delivery.

Best for: Most common for ocean freight. Standard for medium to large orders.

FCA — Free Carrier

Meaning: Seller delivers goods to a named place (e.g., FCA Ningbo Airport). Risk transfers when goods are handed to buyer's carrier.

Best for: Air freight, container load shipments, multi-modal transport.

CFR — Cost and Freight

Meaning: Seller pays for main freight to destination port. Risk transfers when goods are on board at origin port.

Difference from FOB: Seller arranges and pays for ocean freight. Buyer still bears risk during transit.

Best for: Buyers who want seller to handle shipping but want to insure goods themselves.

CIF — Cost, Insurance and Freight

Meaning: Same as CFR, but seller also provides minimum insurance coverage (110% of invoice value).

Seller responsibility: Export clearance, delivery to port, main freight, minimum insurance.

Buyer responsibility: Import clearance, final delivery, any additional insurance.

Best for: New buyers who want seller to arrange shipping and basic insurance.

DDP — Delivered Duty Paid

Meaning: Seller delivers goods to buyer's named location, cleared for import, with all duties and taxes paid.

Seller responsibility: Everything — export, freight, insurance, import clearance, duties, taxes, final delivery.

Buyer responsibility: Unload goods at their location.

Best for: Small orders, first-time buyers, or buyers who want door-to-door simplicity.

3. Cost & Responsibility Comparison

Incoterm	Export Clearance	Main Freight	Insurance	Import Clearance	Final Delivery

Let me provide that table clearly:

Who Does What

Incoterm	Export Clearance	Main Freight	Insurance	Import Clearance	Final Delivery

I'll present the responsibility table as text:

Who Does What (Seller vs Buyer)

• EXW: Seller does nothing. Buyer does everything.
• FOB: Seller does export + port loading. Buyer does freight + import + delivery.
• CFR: Seller does export + freight. Buyer does insurance + import + delivery.
• CIF: Seller does export + freight + minimum insurance. Buyer does import + delivery.
• DDP: Seller does everything. Buyer receives goods.

4. Cost Implications (Real Example)

For a 1000-piece scarf order, factory in China, buyer in USA:

Incoterm	Unit Price	Additional Buyer Costs	Total Buyer Cost (est.)

Let me provide that table properly:

Cost Example (1000 scarves to USA)

Incoterm	Unit Price	Additional Buyer Costs	Total Buyer Cost (est.)

I'll present the cost example as text:

Cost Example (1000 scarves to USA)

• EXW: $5.00/unit. Buyer pays pickup, freight ($0.80), insurance ($0.10), import ($0.30), delivery ($0.30) → Total ~$6.50/unit
• FOB Ningbo: $5.50/unit. Buyer pays freight ($0.70), insurance ($0.10), import ($0.30), delivery ($0.30) → Total ~$6.90/unit
• CIF New York: $6.80/unit. Buyer pays import ($0.30), delivery ($0.30) → Total ~$7.40/unit
• DDP (buyer address): $8.00/unit. Buyer pays nothing extra → Total $8.00/unit

5. Risk Transfer Points

Incoterm	Risk Transfers	Who Bears Risk During Ocean Transit

Let me provide the risk table clearly:

Where Risk Transfers

Incoterm	Risk Transfer Point	Who Bears Ocean Transit Risk

I'll present the risk table as text:

Where Risk Transfers

• EXW: At seller's factory gate. Buyer bears risk immediately.
• FOB: When goods are loaded on vessel. Buyer bears ocean risk.
• CFR / CIF: When goods are loaded on vessel. Buyer bears ocean risk (seller arranges freight).
• DDP: At buyer's delivery location. Seller bears all transit risk.

6. Which Incoterm Should You Choose?

Choose EXW if:

• You have your own freight forwarder
• You are combining shipments from multiple suppliers
• You want full control over shipping and insurance
• Small shipments via courier (DHL, FedEx)

Choose FOB if:

• You want seller to handle export and port loading
• You have a freight forwarder for ocean shipping
• This is the most common choice for medium to large orders

Choose CIF if:

• You are new to importing and want seller to arrange shipping
• You don't have a freight forwarder yet
• You accept minimum insurance coverage

Choose DDP if:

• You want door-to-door simplicity with no hidden costs
• You are ordering small quantities (under 500 pieces)
• You don't want to deal with customs clearance
• You are willing to pay higher unit price for convenience

7. Common Incoterm Mistakes

• "FOB Shanghai" without version: Always add "Incoterms 2020"
• Using FOB for air freight: FCA is correct for air freight
• Assuming CIF includes full insurance: CIF only provides minimum coverage
• Not specifying the named place: "FOB" is incomplete — FOB which port?
• Mixing Incoterms: Can't say "FOB but seller pays freight" — that's CFR

8. Questions to Ask Your Supplier About Incoterms

• ✓ "What Incoterm do you quote (EXW, FOB, CIF, DDP)?"
• ✓ "What is the named place (e.g., FOB Ningbo, CIF New York)?"
• ✓ "What is included in your price — export clearance? documentation?"
• ✓ "Can you quote FOB and CIF so I can compare?"
• ✓ "Do you work with freight forwarders, or should I arrange my own?"

9. Quick Reference Card

• EXW = Buyer does everything from factory pickup
• FOB = Seller loads ship, buyer arranges ocean freight
• CFR = Seller pays ocean freight, buyer bears risk
• CIF = Seller pays freight + minimum insurance
• DDP = Seller delivers to buyer's door, duties paid

Related Guide from Weave Essence

📘 Complete Sourcing Guide for Knitted Scarves & Beanies (L1)

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