FOB Shipping from China | How to Use It?

When you search for FOB online, you'll see FOB shipping point and FOB destination. These are other limitations of the term FOB, but they're not actually commonly used when importing from China. In most cases, you'll sign the FOB shipping term with your seller, as we mentioned above.

FOB shipping point, or FOB origin, means you are responsible for all costs and risks of loss and damage when the goods leave the seller's warehouse. It sounds similar to EXW , with which you will also be responsible for everything from picking up the goods at the seller's location to their final destination.

FOB destination means the seller will retain title to the goods until they are delivered to you. Therefore, the seller must take care of all items from their warehouse to your destination, including all costs and risks. It sounds like CIF , DDU, or DDP, where you must decide the destination and let your seller ship the goods directly there.

Therefore, in practice, if you want the goods shipped to your country's port, Chinese sellers will sign CFR or CIF shipping terms with you, rather than FOB destination. If you want the goods shipped directly to your door, these are actually DDP or DDU delivery terms . Read on to learn the differences in detail.

What is the FOB price?
To better explain the meaning of FOB pricing, let's say you buy 20,000 watches from Alibaba. Your seller is located in Guangdong Province, China. You and the seller agree on a FOB shipping agreement. In this case, the seller will include the costs from the factory to the port of Guangzhou and the customs declaration fees in the advance FOB quote. That is, the FOB price formula is:

FOB Price = Original Product Price + Cost from Factory to Guangzhou Port + Customs Declaration Fees

For example, the original price of a watch is $10, the cost from the factory to the port of Guangzhou is $800, and the customs declaration fee is $500.

FOB Price = $10 * 20,000 pieces + $800 + $500 = $201,300

Typically, the seller will give you the FOB ($201,300) quote in two ways.

One of them is that the seller will charge FOB rates for each product. Therefore, the unit price of the product you actually receive under FOB terms is:

FOB Price / 20,000 pieces = $201,300 / 20,000 pieces = $10,065 per piece

Another way is that some sellers will tell you that the unit price of a watch is $10 and the FOB cost is $1300 ($800 + $500).

In any case, you must pay the seller $201,300 and will not be responsible for the cargo until it is loaded onto the designated vessel at the port of Guangzhou. The seller will be responsible for all of the above.

Please note: FCL and LCL shipments will have some impact on FOB rates. If your shipment is shipped FCL (full container load), the seller will complete the customs declaration for you. However, if your shipment is shipped LCL (less than container load), your international carrier will handle the customs declaration and then charge the seller.

For bulk cargo (LCL), if the seller's FOB cost is $400, it will be $600 or even more if handled by the carrier. Therefore, the seller will reserve space for the unstable customs declaration fee when quoting.

Why do many buyers like FOB shipping from China?
Experienced FOB buyers often prefer the FOB delivery term because they typically have freight forwarders in their own countries. Their freight forwarders can easily calculate all logistics and import costs from any port in China to the buyer's warehouse.

Therefore, if a buyer wants to compare prices from different sellers, such as three sellers located in Yiwu, Shanghai, and Guangzhou, they will want the seller to provide the FOB price, as it includes all export duties and costs to the port in China. This will make it easier for the buyer to compare their import costs.

Furthermore, in the case of FOB, the buyer seems to have a lot to do, but in reality, many forwarders can help you manage everything from a port in China to your place of origin, including all transportation, customs clearance, etc. The buyer simply contacts their forwarder and waits for delivery at the warehouse. This will save you a lot of trouble.

It seems like FOB is really good. No wonder so many buyers prefer it. However, FOB isn't suitable for all situations. It's best for buyers who have some import and export experience and have their own reliable freight forwarders. Therefore, never use FOB shipping terms just because so many people around you do. There are also many other trade terms you can choose from. And now let's look at their differences.

FOB vs. CIF
CIF is short for "cost, insurance, and freight." It's another commonly used shipping term when purchasing from China. Compared to FOB, CIF sellers will help you manage more during shipping.

In the case of CIF, the seller must ship the goods to the port in your country, pay the freight charges, and arrange cargo insurance for you. The seller is responsible for the cargo and assumes all risks and costs until the goods reach you at the port. You must then find agents to help you clear customs and contact a shipping or courier company to deliver the goods to your location.

Generally, if you don't have a cooperative freight forwarder and would like your seller to help you ship the goods to your country, you can choose CIF. It's generally more suitable for new buyers who don't have much experience with international shipping. You only need to handle the goods when they arrive at your country's port, which will be easier for you.

Here, we need to say something about CFR (Cost and Freight). CFR is similar to CIF. The only difference between them is that a CFR seller does not need to purchase cargo insurance, while a CIF seller does. Therefore, according to CFR, to increase the security of cargo transportation, it is necessary to purchase certain transportation insurance at one's own expense.

FOB vs. DDP
If you sign a DDP (Delivery Duty Paid) shipping contract with the seller, they will actually provide you with door-to-door service. Your seller will handle all processes from their factory to your destination, including all transportation and costs, import and export customs clearance, duties and taxes, and more.

DDP is also very suitable for new buyers and is very popular among e-commerce sellers. For example, many Amazon FBA sellers ask their Chinese suppliers to ship products to Amazon warehouses using DDP.

The DDU (Delivery Duty Unpaid) and DDP shipping methods are often compared. They are very similar. The difference between them is that a DDU seller won't pay customs duties or taxes for you, while a DDP seller will cover them.