Glossary
What is FOB (Free On Board)?
FOB (Free On Board) is an Incoterm where the seller's responsibility ends the moment cargo is loaded onto the ship at the named port of export. The buyer then pays for ocean freight, marine insurance, destination port handling, customs duty, and last-mile delivery.
When to use FOB
FOB is best when:
- Your shipment is $5,000+ in value
- You have a trusted freight forwarder (or want to shop quotes)
- You're a recurring importer (saves 10-25% vs CIF on freight)
When NOT to use FOB
- First-time importer with no forwarder relationship → use CIF instead
- Very small/sample shipments < $2,000 → DDP is simpler
- You don't have customs broker relationships at destination
FOB price example
Quote: FOB Shanghai $4.20/unit, MOQ 5,000 units
What you actually pay (US destination):
- Goods: 5,000 × $4.20 = $21,000
- Ocean freight (LCL ~3 CBM): ~$200
- Destination charges (THC, CFS, broker, ISF): ~$650
- Customs duty (varies by HS code): $1,050 (5% example)
- Drayage to warehouse: ~$500
- Total landed: ~$23,400 → $4.68/unit
The "FOB price" was 90% of total. The other 10% is invisible until you handle it. Run your real numbers at /calculator/b2b-margin-calculator/.
FOB vs CIF vs DDP
See the full [Incoterm comparison](/blog/fob-vs-cif-vs-ddp-which-incoterm-protects-new-importers/) for which one fits your scenario.
Related pages