Understanding trade terms: FOB port vs FOB factory

While Incoterms define FOB (Free on Board) as delivery on board the vessel at the named port of shipment, in everyday trade — especially in Asian manufacturing — you will often hear "FOB factory" used colloquially. This can create confusion and costly misunderstandings.

FOB (Incoterms 2020)

Under the official Incoterms definition, FOB means the seller delivers the goods on board the vessel at the agreed port. The seller handles inland transport to the port, export customs, and loading. Risk transfers once the goods are on board.

FOB Factory (Colloquial)

Some suppliers quote "FOB factory," meaning the price includes goods ready for pickup at the factory gate but not inland transport to the port, export customs, or loading onto the vessel. This is closer to EXW in Incoterms terms.

Why It Matters

If you agree to "FOB factory" thinking it means the official FOB, you may be surprised by additional charges for inland trucking, port handling, and export clearance. Always clarify by specifying the Incoterm version and the named port.

Best Practice

On Faktorist, always use official Incoterms with a named location — for example, "FOB Shenzhen port (Incoterms 2020)" or "EXW Supplier's warehouse, Istanbul." The Incoterms Selector tool generates the correct format automatically.