Textile Incoterms: FOB, FCA, CIF, DDP — Which to Choose When Importing from Madagascar?

Reminder: what does an Incoterm define?

An Incoterm (International Commercial Term, published by ICC) defines three things in an international contract: who pays what (transport, customs, insurance), where the seller's responsibility ends (port of loading, port of destination, buyer's warehouse), and when the risk transfers to the buyer. It has no tax or customs value of its own — it's a contractual framework.

Incoterms 2020 list 11 terms, but in practice textile import from Madagascar uses only 4: FCA (Free Carrier), FOB (Free On Board), CIF (Cost Insurance Freight) and DDP (Delivered Duty Paid). The others (EXW, CPT, CIP, DPU, DAP, FAS) are marginal or ill-suited to containerised shipping.

The 4 useful Incoterms for textile

FCA — Free Carrier (factory or export terminal). The seller hands the goods to the buyer's appointed forwarder, either at the factory or at an export terminal. The buyer handles export, sea freight, insurance and import customs. Suited to buyers with a structured forwarder in Madagascar.

FOB — Free On Board (port of loading, Toamasina). The seller delivers, clears export and loads the container on board the vessel at the Malagasy port. From the rail crossing, risk transfers to the buyer, who handles sea freight, insurance and import customs. The reference Incoterm for textile: balanced between seller-side control (Malagasy export) and buyer-side control (route to Europe).

CIF — Cost Insurance Freight (port of destination, Le Havre/Marseille/Rotterdam). A FOB variant where the seller additionally pays sea freight to the European port and takes out minimum insurance (Clause C, limited cover). Risk still transfers at the rail crossing in Toamasina despite appearances — a point often misunderstood.

DDP — Delivered Duty Paid (buyer's warehouse). The seller handles everything: export, freight, insurance, import customs, warehouse delivery. The buyer pays only the invoiced price. Maximum comfort — but additional cost and lost visibility on the components.

Numerical comparison on a 40' HC

Assumption: 40' HC container, 8,000 pieces of cotton layette, ex-works €4.50/piece (€36,000 goods), Toamasina → Le Havre route.

The FOB → DDP spread is +18% of invoicing. On paper DDP looks costlier, but you have to compare to total landed cost: a buyer who negotiates their own sea freight, insurance and customs well lands between €41,500 and €43,000 from an FOB base — €1,500 to €3,000 saved per container.

3 traps to avoid (insurance, AGOA, customs)

1. The CIF insurance trap. The "Clause C" insurance bundled with CIF only covers major losses (sinking, fire). It doesn't cover usual damage or theft. A buyer who wants real cover (Clause A) must subscribe it separately — and loses CIF's edge over FOB.

2. The AGOA / EU-ACP trap. Garments made in Madagascar enjoy 0% customs duty on EU entry (ACP agreement) and US entry (AGOA), provided they ship with a certificate of origin (EUR.1 for EU) signed by Malagasy customs. Without this document, standard duties apply (12% average on EU textile imports). The manufacturer must supply it — check it's in the export file.

3. The DDP VAT trap. In DDP, the seller pays VAT on import — but can't always recover it without a VAT number in the destination country. The cost of unrecoverable VAT is often baked into the DDP price without the buyer seeing it. For a brand that can recover its EU VAT, FOB or FCA avoids this waste. See the detail in our textile price calculation, ex-works to FOB.

Our recommendation: why FOB

For nearly all European brands sourcing in Madagascar, FOB Toamasina is the most rational Incoterm, for four reasons:

• Visibility. You see the goods price clearly and negotiate logistics separately with your own forwarder — usually a better deal than the seller's bundled freight.
• Freight control. An EU forwarder under a framework contract obtains sea freight rates 10–20% below the spot rates billed by the seller in CIF.
• Adjustable insurance. You choose the clause (A, B or C) and deductible according to your risk tolerance.
• Optimised VAT and customs. You stay the registered importer, recover VAT, and manage the EUR.1 certificate directly with your forwarder.

FCA only makes sense if you have a structured forwarder on the ground capable of handling Malagasy pre-carriage and export. CIF is rarely justified — the bundled insurance is too thin. DDP suits ad-hoc cases (small lot, brand without import logistics) but becomes expensive at recurring volumes.

In one sentence: negotiate FOB, optimise your downstream chain, and make DDP the exception, not the rule.