How to Calculate an FOB Price
Two steps: build the FOB cost per unit, then divide by one minus your margin. Everything difficult is in the first step — deciding which costs belong in it.
The Formula
Under FOB (Incoterms® 2020) the seller delivers the goods on board the vessel at the named port of shipment and clears them for export. So the seller's cost covers everything up to that moment and stops there.
Step 1 — FOB cost per unit
FOB cost/unit = EXW unit cost + (origin charges total ÷ quantity)
Step 2 — FOB selling price
FOB price/unit = FOB cost/unit ÷ (1 − margin)
Origin charges are a shipment cost, not a per-piece cost — a container costs the same whether it holds 500 units or 5,000. That is why they are divided by quantity rather than added to the unit cost. It is also why the FOB price of the same product changes with order size, while the EXW cost does not.
Step 2 divides instead of multiplying because margin is a share of the selling price. A 15% margin means profit is 15% of the price; the price is cost ÷ 0.85, not cost × 1.15. If you want the multiplier version, that is markup, and it is a different number.
What Belongs in FOB Cost — and What Does Not
This is where FOB quotes actually go wrong. The test is simple: does this cost arise before or at the moment the goods are on board the vessel? If yes, it is the seller's under FOB. If it arises after that moment, it is the buyer's.
In the seller's FOB cost
Goods at EXW · inland freight from factory to the port · export customs declaration and any licensing or inspection · origin terminal handling (THC) · port security and documentation fees · bill of lading fee · loading and stowage on board
Not in the seller's FOB cost
Ocean or main-carriage freight · marine insurance · destination terminal handling · import customs clearance and duty · destination inland delivery · any import VAT or GST
Two boundary cases are worth deciding explicitly, because they are the ones that produce disputes. Origin terminal handling sits at the boundary: many carriers bill it to whoever pays the freight, which under FOB is the buyer, so it can appear on the buyer's invoice even though the seller's contract price was meant to include it. Agree in writing which side pays THC at origin before the booking is made. And banking charges, inspection fees requested by the buyer, and certificate-of-origin fees are not carriage costs at all — they are commercial costs, and whether they sit in your FOB price is a negotiation, not an Incoterms rule.
Worked Example
A shipment of 2,000 units. Origin costs are quoted as shipment totals, because that is how forwarders quote them.
| EXW unit cost | $4.2 / unit |
| Inland freight, factory to port | $600 |
| Export clearance and documents | $180 |
| Origin terminal handling (THC) | $340 |
| Origin charges total | $1,120 |
| Origin charges per unit ($1,120 ÷ 2,000) | $0.56 |
| FOB cost per unit ($4.2 + $0.56) | $4.76 |
| Target margin | 15% |
| FOB price per unit ($4.76 ÷ 0.85) | $5.6 |
On a 2,000-unit order that is a shipment value of $11,200. Profit at a 15% margin is $0.84 per unit, or $1,680 across the order. Note what happened when order size changed: the $1,120 of origin charges is fixed, so quoting 1,000 units instead of 2,000 would raise origin cost per unit from $0.56 to $1.12 and push the FOB price to $6.259 at the same margin. Recheck the arithmetic whenever quantity changes — this is the single most common source of a stale quote.
FOB Cost Builder
Put your own numbers in. The build-up below uses the same calculation engine as the rest of this site, so the figures agree with the main FOB & CIF calculator.
Your Origin Costs
Your FOB Build-Up (per piece)
Reading the Result
Three things to check before you send the quote. First, does the shipment total clear your costs? The FOB price line already contains the margin, so multiplying it by quantity gives revenue — not profit. Profit is revenue minus EXW cost minus origin charges. Second, is the margin still the margin you wanted? Entering a 15% margin gives you a 15% margin by construction; but if you later discount the FOB price to win the order, the margin falls faster than the discount, because the denominator moves with the price. Third, is the quantity the one the buyer will actually order? Origin charges divided across a smaller order raise the unit price, as the example above shows.
If your buyer wants a delivered price instead of an FOB price, the FOB figure is the correct starting point — add freight and insurance to reach CIF, or start from the destination side to work out what the goods cost once duty is paid with the landed cost calculator. The cost ladder connecting all the sea-freight terms is set out in Incoterms 2020 explained.
Currency
Keep every line in one currency. If your EXW cost is in CNY and your forwarder quotes in USD, convert one of them at a single rate before entering the figures — a mixed-currency build-up produces a number that looks plausible and is wrong. The main calculator accepts CNY input directly and converts at a rate you supply.
The formulas and assumptions used here are written out on the methodology page.
Keep Reading
- FOB price from EXW — the same build-up when you only know your factory cost.
- EXW vs FCA vs FOB — where the seller's cost obligation actually ends.
- Profit margin calculator — margin, markup, cost and price, any two of them.
- Export price calculator — cost, selling price, gross profit and gross margin for a whole order.
- Supplier quote comparison — normalize two quotes that arrived on different Incoterms before deciding which is actually cheaper.
Frequently Asked Questions
What is the formula for FOB price?
FOB cost per unit = EXW unit cost + (origin charges ÷ quantity). FOB selling price = FOB cost ÷ (1 − margin). Both steps are above, and the cost builder applies them to your own figures.
Does FOB include freight?
No. Under FOB the buyer arranges and pays the main carriage. Freight enters the price only when you move to CFR (cost and freight) or CIF (cost, insurance and freight).
Is FOB the same as ex-factory?
No. EXW stops at the seller's premises and leaves the buyer to load and clear the goods for export. FOB includes inland movement, export clearance and loading on board, so an FOB price is always higher than the EXW cost of the same goods.
Can I use FOB for air shipments?
No. FOB is one of the four sea and inland-waterway rules. For air freight use FCA instead.
Why did my FOB price change when I only changed the quantity?
Because origin charges are fixed per shipment and are divided across the units. Halving the order roughly doubles the origin cost per unit.