FOB (Free On Board) Explained
FOB is one of the most commonly used Incoterms in China trade. Under FOB terms, the seller delivers goods onto a vessel nominated by the buyer at the port of shipment. Risk transfers from seller to buyer once goods are on board.
What the Seller Pays (FOB)
- Packaging and inland transport to the port
- Export customs clearance
- Loading charges at the port of shipment
What the Buyer Pays (FOB)
- Ocean freight
- Marine insurance
- Import customs clearance and duties
- Destination port charges
- Inland transport to final destination
FOB vs CIF vs DDP: Quick Comparison
| Term | Seller Responsibility | Buyer Risk | Cost to Buyer |
|---|---|---|---|
| EXW | Minimal (just make goods available) | High | Lowest product cost |
| FOB | Deliver to port, load on vessel | Medium | Low product + high shipping |
| CIF | Ship to destination port + insurance | Medium | All-inclusive to port |
| DDP | Full door-to-door + duties paid | Minimal | Highest all-in price |
Common Chinese Ports for FOB
- Shanghai (上海): China's busiest port, handles all cargo types
- Shenzhen/Yantian (深圳/盐田): Major electronics and consumer goods port
- Ningbo (宁波): Second busiest, excellent for general cargo
- Guangzhou (广州): Strong for machinery and heavy equipment
- Qingdao (青岛): Major port for chemicals and raw materials
Tips for Using FOB
- Always specify the exact port name in your contract
- Get a FOB quote from the supplier and compare with CIF
- Factor in destination costs before deciding FOB is cheaper
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