What Is FOB Price? The Short Answer
What is FOB price in practice? FOB stands for free on board, one of the trade terms known as Incoterms. A price quoted FOB covers the cost of the goods plus everything the seller must do to put them on board the vessel at the named port of shipment, including clearing them for export. Once the goods are on board, the seller's part is done: from that point, the buyer takes on the risk of loss or damage and pays for the main sea freight and what follows.
For a clothing brand, the FOB price is therefore the price of the finished, packed garments at the factory's port, not the price of having them delivered to your door. That distinction is the source of most budgeting mistakes. A low FOB quote tells you what the factory charges, but it does not tell you what the garments will cost once freight, insurance, duty and delivery are added.
The sections below explain what an FOB quotation normally contains, how it differs from other terms, how to build up the landed cost and how to compare two quotes fairly.
What Does FOB Mean in Clothing Manufacturing?
In clothing manufacturing, an FOB quote usually means the factory is selling you a finished garment rather than only its labour. The factory sources the fabric and trims, cuts, sews, finishes, labels and packs the garments, then delivers them to the port and loads them for you. This is often called full package production, and it is why people also ask what is FOB price when comparing it with CMT, where the buyer supplies the materials.
The Incoterms rules are published by the International Chamber of Commerce and define who does what, and who bears risk and cost, between a seller and a buyer. They are not law on their own: they take effect when the contract refers to them. Because the rules are revised from time to time, the contract should name the edition, such as Incoterms 2020, and the named place, such as a named port like Chattogram, the main sea port in Bangladesh.
Under Incoterms 2020, FOB is intended only for sea and inland waterway transport. For air freight, or for containers handed over at a terminal before being loaded, the rules recommend FCA (free carrier) instead. If your goods fly, your quote should say FCA, not FOB.
What Is Included in an FOB Quotation, and What Is Not
An FOB quotation covers the production costs and the seller's delivery work up to the loading point. It does not cover the main journey or the import side. The table shows the usual split. Individual quotations differ, so always ask the factory to list inclusions in writing.
What an FOB quote typically covers
| Included in the FOB price | Usually not included |
|---|---|
| Fabric and trims (when the factory sources them) | Main freight by sea or air |
| Cutting, sewing and finishing (the make cost) | Cargo insurance |
| Labels, hang tags and standard packaging | UK import duty |
| Factory overheads and profit | Import VAT, where applicable |
| Inland transport from factory to the port | Customs broker and clearance fees |
| Export clearance at origin | Destination port or airport charges |
| Loading goods onto the vessel | Delivery from the UK port to your address |
Typical split only. Inclusions can differ by factory and contract, so confirm each line in writing.
Packing is one of the lines worth reading closely. A standard polybag and carton may be included, while custom boxes, special hang tags or retail-ready packing may be extra. Our clothing packaging guide explains the options, so your quote can state the exact packing you expect.
FOB vs CMT, EXW, FCA, CIF and DDP
The terms below are the ones clothing buyers meet most. They sit on a spectrum of how much of the journey the seller handles. FOB and EXW leave most of the logistics with the buyer, CIF hands the main freight to the seller, and DDP hands almost everything to the seller. CMT is different in kind: it is a production arrangement, not an Incoterm, which we cover below.
Incoterms and production terms compared
| Term | Who does what | Risk passes to buyer | Typical use |
|---|---|---|---|
| EXW (ex works) | Seller makes goods available at its premises; buyer arranges everything else, including export clearance | At the seller's premises | Buyers with their own freight forwarder and export knowledge |
| FCA (free carrier) | Seller delivers to the buyer's carrier at a named place and clears export | When handed to the carrier | Air freight and containers handed over at a terminal |
| FOB (free on board) | Seller loads goods on the vessel at the named port and clears export | Once on board the vessel | Sea shipments from factory to port; very common in garments |
| CIF (cost, insurance, freight) | Seller arranges and pays sea freight and minimum insurance to the destination port | Once on board the vessel at origin | Buyers who want one freight price to a named port |
| DDP (delivered duty paid) | Seller delivers cleared for import, paying duty and costs to the destination | At the named destination | Rare for small buyers; the seller carries import risk |
| CMT (cut, make, trim) | Factory charges for labour and trims; buyer usually supplies fabric | Depends on the Incoterm agreed | Buyers with their own fabric and patterns |
Simplified summary of Incoterms 2020 and production terms. Read the full rule text and confirm details in your contract.
Note that CIF moves the freight cost to the seller but risk still passes at loading, which surprises many buyers. For a closer comparison in a denim context, see our guide to Incoterms for jeans orders, and for the production side read CMT vs FOB clothing manufacturing.
How Control and Workload Compare Across Terms
Choosing a term is a trade between control and effort. The more of the journey you take on, the more you can shop around and the more you must manage. The ratings below are indicative and describe typical experience for a small brand, not fixed outcomes.
Indicative buyer experience by term
1 dot = low, 5 dots = high
| EXW | FOB | CIF | DDP | |
|---|---|---|---|---|
| Buyer control of freight | ●●●●● | ●●●●● | ●●●●● | ●●●●● |
| Buyer workload | ●●●●● | ●●●●● | ●●●●● | ●●●●● |
| Ease of comparing quotes | ●●●●● | ●●●●● | ●●●●● | ●●●●● |
| Visibility of cost items | ●●●●● | ●●●●● | ●●●●● | ●●●●● |
| Suited to a first order | ●●●●● | ●●●●● | ●●●●● | ●●●●● |
Indicative ratings for discussion, not measured data. Real experience depends on the supplier, route and the paperwork.
Many small brands start on FOB with a forwarder who handles the freight and the paperwork. Others prefer a delivered price at first to reduce the number of moving parts, then move to FOB as they learn. There is no single right answer, as long as you know what each quote includes.
From FOB Price to Landed Cost
The figure that matters to your margin is the landed cost: what each garment costs once it has arrived in your warehouse. It is built from the FOB price plus every cost between the port of shipment and your door. The bar below shows the idea as an illustrative proportion only. The split is made up to show the structure, because real shares vary widely by product, route and shipping method.
Illustrative landed cost build-up
Illustrative proportions only
Illustrative split to show structure. Not real data and not a prediction for any product. Your own proportions depend on the route, mode and goods.
Write the landed cost as a simple formula so that nothing is missed: landed cost equals FOB price, plus international freight, plus insurance, plus import duty, plus clearance and port fees, plus delivery to your warehouse, plus any import VAT you cannot recover. For UK imports, the value on which duty is charged generally includes freight and insurance to the UK, so it can be higher than the FOB figure. Ask a customs broker how the customs value will be calculated, and check the classification and any duty rate in the UK Trade Tariff.
A Worked Way to Build the Landed Cost
The sequence below turns a quote into a budget. Complete each step for every style and keep the sources in a spreadsheet so that you can update it when freight or documentation changes. Our guides to importing clothing from Bangladesh to the UK and importing jeans into the UK cover the import steps in more detail.
Five steps from quote to landed cost
- 1Confirm the FOB termsGet the Incoterm, edition and named port in writing, and list inclusions.
- 2Add freight and insuranceRequest a quote from a forwarder for the route, mode and volume.
- 3Check duty and VATConfirm the commodity code, duty rate and VAT treatment in the UK Trade Tariff or with a broker.
- 4Add clearance and deliveryInclude broker fees, port charges and delivery to your address.
- 5Divide by unitsDivide the total by the number of garments to give a landed cost per piece.
Duty and VAT depend on the goods, origin and your status. Do not assume; confirm with a broker or the official tariff.
Use the result to check your margin before you commit. Once you understand what is FOB price and what sits on top of it, every new quote becomes a quick calculation. If the landed cost looks too high, the levers are the order quantity, the packing method, the shipping mode and the product specification, not the headline FOB figure alone.
What Is FOB Price vs Ex-Factory and Port Charges?
A common confusion is the difference between an FOB price and an ex-factory price. The ex-factory price excludes inland transport and export clearance, so it is lower than FOB for the same garment. If one supplier quotes ex-factory and another FOB, the two prices are not comparable until you add the transport, port handling and export paperwork to the first.
Ask what is FOB price for each supplier, then also ask which port is named. A price quoted for a different port or a different shipping point can change your inland costs. In Bangladesh, a named port such as Chattogram is the normal sea shipping point, but always check the name on the quotation rather than assume.
How to Compare Two FOB Quotes Fairly
Two quotes can look similar and still describe different products. Before you compare the numbers, compare the specification, because small differences in fabric weight, trims and packing change the price. The checklist below helps you make sure the quotes cover the same ground.
Questions to ask before comparing FOB quotes
- Which Incoterm, edition and named port does the price refer to?
- What fabric, GSM and composition are priced, with a swatch reference?
- Which trims, labels and hang tags are included?
- What packing is included: polybag, carton, ratio pack or solid pack?
- Is a sample charge included or separate, and is it refundable against bulk?
- What are the minimums per style and colour?
- What is the validity period of the quote?
- What are the payment terms and what deposit is required?
- What happens to the price if the order quantity changes?
Ask for answers in writing. A quotation is only comparable when the specification and terms match.
A clear specification makes this far easier, so prepare a tech pack before you ask for quotes. Our guide to planning a capsule collection also shows how quantity and shared fabrics influence the number you receive.
Mistakes to Avoid With FOB Pricing
Most FOB problems come from assuming too much. The table lists the frequent ones and the fix.
Common FOB mistakes and fixes
| Mistake | Why it hurts | Fix |
|---|---|---|
| Treating FOB as the final cost | Freight, duty and delivery are missing from the budget | Build a landed-cost sheet for every style |
| Using FOB for air freight | The term is not designed for it; risk transfer is unclear | Use FCA for air shipments |
| Not naming the port | The price and the risk point are ambiguous | State the exact port in the quotation and contract |
| Comparing different specifications | Cheaper quote may use lighter fabric or fewer trims | Compare against the same tech pack |
| Ignoring insurance | Risk passes at loading, so a loss may be uninsured | Arrange cargo insurance in your name or with the forwarder |
| Forgetting the Incoterms edition | Rules change between editions | State the edition in the contract and check it is current |
Practical guidance. Take professional advice on contracts, insurance and customs.
How Ruhrose Approaches FOB Quotations
Ruhrose develops hoodies, jersey, denim and woven casualwear for UK buyers, with production in Bangladesh, so FOB quotations are a familiar part of our conversations. We explain what a quotation includes before you commit, and we sample before bulk so that the specification behind the price is clear. We do not publish prices in guides, because they depend on fabric, construction and quantity. For help choosing a supplier, see how to choose a clothing manufacturer.