What Is FOB Incoterm in Apparel?

FOB (Free on Board) is an Incoterm where the seller delivers goods onto a named vessel at a specified port, and risk transfers to the buyer once the cargo crosses the ship's rail. In apparel sourcing, you'll typically see this written as FOB Shanghai, FOB Ningbo, or FOB Ho Chi Minh City.

What FOB Actually Means

FOB is one of 11 Incoterms published by the International Chamber of Commerce. The 2020 revision clarifies that the seller completes delivery when goods are loaded on the vessel. Before that moment, the factory covers inland transport, export customs clearance, and loading costs. After loading, you own the freight, insurance, destination duties, and final delivery.

The named port matters. FOB Shanghai means the factory gets the goods to Shanghai port. If you wanted pickup from Ningbo instead, the factory's trucking costs change, and so does your quoted price.

What's Included in an FOB Price

When a factory quotes FOB, their price typically bundles:

• Raw materials and production costs
• Quality control and packing
• Inland freight from factory to port (often 2-8 hours by truck in coastal China)
• Export customs documentation
• Terminal handling and loading fees

You pay separately for ocean freight, marine insurance, destination port charges, import duties, and last-mile delivery. On a 5,000-unit hoodie order shipping from Guangzhou to Los Angeles, expect $3,000-6,000 in ocean freight alone depending on container rates.

Why FOB Dominates Apparel Sourcing

Most DTC brands use FOB because it offers control over shipping costs and timing. You select your freight forwarder, negotiate rates directly, and track your cargo without relying on factory logistics contacts.

FOB also provides pricing transparency. When factories quote CIF (Cost, Insurance, Freight), they mark up shipping and insurance. That markup can run 15-25% above actual rates. With FOB, you see the production cost cleanly and manage freight as a separate line item.

For brands running 10,000+ units per season, that visibility often saves $0.30-0.80 per garment compared to bundled quotes.

Common FOB Mistakes

Assuming insurance is included. It's not. FOB transfers risk at loading. If your container falls off the ship, you absorb the loss unless you purchased marine cargo insurance separately.

Ignoring port selection. A factory 400km inland from Shanghai might quote FOB Shanghai, but their trucking cost to port eats margin. Ask which port is closest to production and compare.

Skipping pre-shipment inspection. Once goods load, they're your problem. Schedule AQL inspection before the container seals. Fixing defects at origin costs a fraction of returns or chargebacks.

Forgetting about demurrage. If your freight forwarder misses the pickup window, port storage fees accumulate fast. Shanghai terminals charge roughly $150/day per container after free time expires.

How FOB Shows Up in an Ohzehn Deal

When Ohzehn matches your brand with a vetted factory, your production agreement specifies the Incoterm. Most quotes default to FOB from the nearest major port. During the 72-hour quote process, you'll see itemized pricing: fabric, CMT, trim, and delivery to port.

If the factory holds certifications like BSCI or WRAP, those compliance costs are baked into the FOB price. You won't see separate audit line items unless you request additional standards beyond what the factory already maintains.

FOB vs CIF vs EXW

EXW (Ex Works) puts everything on you. You arrange pickup from the factory gate, handle export customs, and manage every leg. It's cheaper on paper but operationally heavy. Unless you have a China-based logistics team, avoid it.

CIF (Cost, Insurance, Freight) means the factory pays for shipping and insurance to your destination port. Convenient, but you lose visibility and often pay inflated rates. Factories aren't freight specialists. They pass through broker quotes plus margin.

FOB splits the difference. The factory handles what they're good at: production and local export logistics. You control the ocean leg where competitive bidding from forwarders saves real money.

For orders under 3,000 units, CIF sometimes makes sense because your freight volumes don't warrant negotiating power. Above that threshold, FOB almost always wins.

When FOB Doesn't Fit

Air freight shipments rarely use FOB because the term is designed for sea transport. Use FCA (Free Carrier) for air cargo, specifying the airport.

If you're shipping LCL (less than container load), FOB still applies, but your consolidator adds complexity. The factory delivers to the consolidation warehouse, not directly onto a vessel. Confirm handoff points carefully.

For brands importing into countries with complicated customs regimes, DDP (Delivered Duty Paid) shifts all risk to the factory. You pay more per unit, but the factory handles import clearance. This works for small test orders but scales poorly.

Negotiating FOB Terms

Push for itemized quotes. A good factory will break out fabric, CMT (cut-make-trim), packaging, and inland freight separately. If they only provide a single FOB number, ask for the breakdown.

Request quotes from multiple ports if the factory is inland. FOB Qingdao might save $0.10/unit over FOB Shanghai depending on factory location and current port congestion.

Lock in your Incoterm before production starts. Changing terms mid-order creates confusion about who pays for what, especially if quality issues require reshipment or inspection delays push your booking window.