Problem
Export buyers often ask: The factory quotes 120 RMB ex-factory, but what will it cost me landed in Los Angeles? Without understanding FOB calculation, you cannot accurately budget for landed cost or compare supplier quotes.
Core Conclusion
FOB (Free On Board) price = EXW (ex-factory) price + inland transport + customs clearance + port handling charges. For denim garments from Guangzhou to Shenzhen port, expect to add 3-8 RMB per piece.
1. Understanding Trade Terms
EXW (Ex Works)
Definition: Price at factory gate. Buyer handles all transport.
Buyer Responsibilities: Factory to Truck to Customs to Port to Shipping to Destination
FOB (Free On Board)
Definition: Price includes delivery to port and loading onto vessel.
Factory Responsibilities: Factory to Truck to Customs to Port (loaded on ship)
Buyer Responsibilities: Port to Ocean Freight to Destination Port to Customs to Warehouse
CIF (Cost, Insurance, Freight)
Definition: Price includes ocean freight and insurance to destination port.
Factory Responsibilities: Factory to Destination Port
Buyer Responsibilities: Destination Port to Customs to Warehouse
DDP (Delivered Duty Paid)
Definition: Price includes everything to buyers warehouse (including import duties).
Factory Responsibilities: Factory to Buyers Warehouse (all-inclusive)
Buyer Responsibilities: Unload at warehouse
2. FOB Price Calculation
FOB Price = EXW Price + Inland Transport + Customs Clearance + Port Charges
Example: 300 Pieces from Guangzhou to Shenzhen Port
| Cost Component | Total Cost | Per Piece |
|---|---|---|
| EXW Price | 39,300 RMB | 131 RMB |
| Inland Transport | 800 RMB | 2.67 RMB |
| Customs Clearance | 300 RMB | 1.00 RMB |
| Port Handling (THC) | 600 RMB | 2.00 RMB |
| Documentation | 200 RMB | 0.67 RMB |
| Total FOB Cost | 41,200 RMB | 137.34 RMB |
FOB Premium: 137.34 – 131 = 6.34 RMB per piece (4.8% increase)
3. FOB by Order Quantity
| Quantity | EXW Price | FOB Premium | FOB Price |
|---|---|---|---|
| 50 pieces | 170 RMB | +15 RMB | 185 RMB |
| 300 pieces | 131 RMB | +6 RMB | 137 RMB |
| 1000 pieces | 110 RMB | +3 RMB | 113 RMB |
| 5000 pieces (FCL) | 95 RMB | +1.5 RMB | 96.5 RMB |
4. FOB vs Other Trade Terms
| Trade Term | Price per Piece | Total Cost |
|---|---|---|
| EXW Guangzhou | 131 RMB | 39,300 RMB |
| FOB Shenzhen | 137 RMB | 41,200 RMB |
| CIF Los Angeles | 152 RMB | 45,600 RMB |
| DDP Los Angeles | 185 RMB | 55,500 RMB |
5. Recommendations
For Small Buyers (50-300 pieces):
- Use FOB terms (not EXW) for simplicity
- Budget 5-8 RMB/piece for FOB premium
- Ask factory to handle customs clearance
- Get all-inclusive quote in writing
For Large Buyers (5000+ pieces):
- Use FCL (Full Container Load) for efficiency
- Negotiate annual FOB rates with factory
- Budget 1-3 RMB/piece for FOB premium
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