How much you know about FOB price

FOB, free on board. One of the term that regularly used in international trade.

Today， we will not talk about general meaning and history of it, but only focus on regular practice now in running of international trade.

Under the Incoterms 2010 standard published by the International Chamber of Commerce, FOB is only used in sea freight and stands for "Free On Board". The term is always used in conjunction with a port of loading.

 "FOB port" means that the seller pays for transportation of the goods to the port of shipment, plus loading costs. The buyer pays the cost of marine freight, transport, insurance, unloading, and transportation from the arrival port to the final destination, also tariff and dumping if any. The passing of risks occurs when the goods are loaded on board at the port of shipment. 

For example, "FOB Qingdao" indicates that the seller will pay for transportation of the goods to the port of Qingdao China, and the cost of loading the goods on to the cargo ship (this includes inland haulage, customs clearance, original  documentation charges, demurrage if any, origin port handling charges). The buyer pays for all costs beyond that point, including unloading. 

Responsibility for the goods is with the seller until the goods are loaded on board the ship. Once the cargo is on board, the buyer assumes the risk.

So when you get quote from a Chinese supplier with FOB, please note that this does not mean your direct cost. Please still consider below:

*Marine freight

*Local transportation from your destination port to your warehouse or other nominated destinations

*Insurance for shipment, and also local transportation

*Unloading 

*Customs clearance charges

*Import Tariff

*Dumping (if any)

If you are new to buy overseas, this is important thing to keep in mind of above things to calculate. Our regular practice is to give a DDP price indication to the buyer based on their quantity and delivery time. 

Our research will include marine freight change (seasonal as per delivery), HS code checking on import tariff clarification, dumping checking, local transportation, insurance and etc. Then Even you will pay only FOB to your suppliers, but you will still have an idea on how much you will finally pay for this item to be delivered till into your warehouse. 

This will make your cost clear enough.

With our image, you will have a better understanding of the obligation of buyer and seller clearly specified.

Good Luck!