Every garment quote rests on shipping terms, called Incoterms, that decide who pays for what and where the seller's responsibility ends. For US brands importing clothing from Bangladesh, China or Pakistan, FOB (Free On Board) is the term that gives the buyer the most visibility and the most control.
FOB in one minute
Under FOB the factory prices the garments and delivers them on board the vessel at a named port, for example "FOB Chittagong" or "FOB Shanghai", and handles export clearance. From that point you arrange ocean freight, insurance, US customs entry and delivery. The factory price is a clean number: it covers the goods and nothing else.
FOB lets you see every cost, choose every vendor after the port, and compare any two factories on the same footing. That clarity is where the savings come from.
Five reasons FOB pays off
- You see the real price. The factory quote is the factory quote. Freight, insurance, duty and broker fees sit on separate lines, so nothing is buried inside a single bundled number.
- You shop freight yourself. Ocean freight is a market. With FOB you can ask more than one forwarder to quote the same shipment and book the one that suits your schedule and budget. A delivered price locks in whatever freight the seller chose.
- You keep the margin. A seller who quotes DDP has to add freight, duty, handling and a margin for the risk of carrying them. Under FOB you pay those costs at their actual price, not at a marked-up one.
- You control customs. As importer of record you choose your own customs broker, and your broker confirms the classification and duty rate for each style. You can ask them whether any lawful duty-saving options apply to your product, which is not possible when someone else clears the goods on your behalf.
- You can compare factories fairly. When every supplier quotes FOB the same port, you can line up quotes from different countries and see which one is really cheapest once duty and freight are added. It also makes it easy to move an order to a second factory without rebuilding your cost model.
How FOB compares with the other terms
- EXW (Ex Works): the price covers the goods at the factory door. You handle export clearance and inland transport in the origin country as well, which is more work than most brands want.
- CIF (Cost, Insurance and Freight): the seller books freight and basic insurance to your port. It is simple, but the seller picks the forwarder and the freight charge is folded into the price, so you cannot shop it.
- DDP (Delivered Duty Paid): the seller delivers to your door with duty paid. It is convenient, but freight, duty and margin are bundled into one figure, so you cannot tell whether you got a good deal.
- FOB: the factory covers the goods and loading at the port. You buy everything after that at the best price you can find. For sea freight this is the term most garment buyers and factories already work with.
Build your landed cost on FOB
An FOB price is the start of your cost, not the end. A simple landed-cost sheet makes the full picture clear, and because each line is separate you can improve each one:
- FOB factory price per garment, with the named port.
- Ocean freight and origin and destination handling charges.
- Cargo insurance, optional but sensible for a first shipment.
- Import duty, set by the garment's classification in the Harmonized Tariff Schedule and its country of origin. Rates vary by fabric and style, and trade measures change, so confirm the current rate for each style.
- Customs fees and broker charges, including the processing and harbor fees US Customs applies to sea shipments.
- Delivery from the port or container yard to your warehouse.
Use the same sheet for every quote. A cheaper factory with a higher duty rate can cost more overall than a pricier one, and the sheet shows you which is which.
Is FOB hard for a new brand?
Less than it sounds. As importer of record you need a customs bond and a licensed customs broker, and your broker files the Importer Security Filing for ocean cargo before the goods are loaded. In practice the set-up is short:
- Choose a customs broker and arrange a customs bond.
- Ask a freight forwarder to quote the route from your named port to your US port or warehouse.
- Send the broker the product details so they can confirm classification and duty before you place the order.
- Keep your commercial invoice, packing list and bill of lading together for every shipment.
Once this is in place, every later order runs the same way, and the cost of setting it up is repaid by the freight and handling charges you no longer pay as a hidden margin.
How to request an FOB quote
- Ask every supplier to quote the same style and quantity, with the named port written next to the term.
- Check what the unit price includes: fabric, trims, labels, polybag, hangtag and carton packing.
- Ask whether sample costs are separate and whether they are credited against the order.
- Confirm the payment terms and who the contract is with. See ten questions to ask a sourcing agent.
Work with Dragon Charm on FOB terms
Dragon Charm manages garment production from New York across Bangladesh, China and Pakistan on FOB terms, so you can see what you pay for and keep control of everything after the port. Shipping terms apply after the garments are made; who sources the fabric, trims and packaging is covered in our guide to full-package clothing manufacturing. To get an FOB quote for your style, get in touch.