What Is FOB? Free-on-Board Pricing for Garment Buyers, Explained
FOB is your garments loaded onto the vessel at origin. What's inside an honest FOB, how to read one, and why factory-direct keeps it clean.
FOB stands for Free On Board. In garment sourcing it means the price of your goods loaded onto the vessel at the origin port — for Bangladesh, that's usually Chittagong (Chattogram). At that point ownership and risk pass to you. The factory has paid for everything up to the ship's rail. From there, ocean freight, marine insurance, and import duty are yours.
That single line is the whole concept. The rest is why factories quote it, what the number actually contains, and how to read two FOB quotes side by side without getting fooled by the cheaper one. The short version a buyer cares about: an FOB is only as honest as the party quoting it. Bought factory-direct, it's a clean number built from real costs on the floor — not a trading-house figure carrying a markup you never see.
FOB vs CIF vs DDP: who pays for what
FOB is one of several Incoterms — the standard rulebook (Incoterms 2020, from the International Chamber of Commerce) defining where the seller's responsibility ends and yours begins. Three show up in almost every garment negotiation: FOB, CIF, and DDP. The difference is how far down the chain the supplier carries the cost and risk before handing it to you.
| Cost element | FOB | CIF | DDP |
|---|---|---|---|
| Fabric, trims, cut-make-trim | Seller | Seller | Seller |
| Inland transport to origin port | Seller | Seller | Seller |
| Loading onto vessel | Seller | Seller | Seller |
| Ocean freight | You | Seller | Seller |
| Marine insurance | You | Seller | Seller |
| Import duty / tariffs | You | You | Seller |
| Customs clearance at destination | You | You | Seller |
| Delivery to your warehouse | You | You | Seller |
CIF (Cost, Insurance and Freight) is FOB plus the ocean freight and insurance to your destination port. The supplier books the vessel and the cargo cover; you still handle duty and everything past the dock. DDP (Delivered Duty Paid) is the far end — the supplier delivers to your door with duty already paid, so the number you're quoted is close to your fully landed cost.
Factories quote FOB by default for a reason: it's the cleanest point to draw the line. Everything up to "on the vessel" is inside the factory's control — sourcing, making, finishing, getting the container to port. Freight rates swing week to week, and duty depends on your country and tariff classification, not ours. Pushing those into the quote means padding it with a guess and a margin to cover the guess. A clean FOB keeps the parts we control transparent and lets you shop freight and manage duty yourself, which most established buyers prefer anyway.
There's a second reason the FOB matters: who builds it. Buy through a trading house or agent and your FOB is their FOB — the factory's number plus a margin you rarely see itemised, sometimes with a quiet substitution underneath to protect it. Buy factory-direct, from the floor actually cutting and sewing the goods, and the FOB is built from the costs in front of you with one margin on top and nothing buried in it. That's the difference a named, direct partner makes before you've compared a single line of spec.
What's actually inside an FOB number
An FOB price is a stack of real costs with a margin on top. Roughly, it breaks down into:
- Fabric. Usually the single biggest line — often around half the cost on a woven garment, more on a heavier or specialised cloth. Driven by fibre, yarn count, construction, and GSM (grams per square metre — the fabric's weight). Heavier and finer both cost more.
- Trims and accessories. Buttons, zips, interlining, labels, thread, hangtags, polybags. Small per piece, but they add up, and branded or certified trims (think YKK zips, Oeko-Tex components) cost more than generic.
- CMT — cut, make, trim. The labour to produce the garment: cutting, sewing, finishing, pressing, packing. This is where a country's wage base shows up in the price.
- Factory overhead and margin. Machines, the building, supervisors, compliance, sampling, and the factory's profit.
- Testing and inspection. Lab tests for colourfastness, shrinkage and fibre composition, plus in-line and final QC.
What is not in an FOB number, and catches buyers out:
- Ocean freight to your port.
- Duty and tariffs, which depend on your country and the garment's HS classification.
- Customs brokerage, port and destination handling.
- Your own margin — FOB is your cost in, not your shelf price.
On duty, the relevant fact for buyers comparing Bangladesh against China is structural, not a number to write into a spreadsheet today. China carries an extra apparel-specific tariff layer (the US Section 301 duties) that Bangladesh does not, and that gap is durable. Precise rates and temporary measures shift with trade policy, so confirm the live figure for your lane with your broker before you model it. The point: two identical FOB prices from two countries can land at very different costs once duty applies.
How to compare FOB quotes apples to apples
A lower FOB is only lower if it's buying the same garment. It usually isn't, and the difference hides in the spec. Before you compare two numbers, make sure both are quoting against the same:
- Fabric composition and GSM. "100% cotton poplin" isn't a spec. 40s/2 vs 30s single yarn, 120 GSM vs 145 GSM — these are different cloths at different prices. A quote that drops the GSM by 15 grams looks cheaper and feels thinner in the buyer's hand six months later.
- Construction. Yarn count, thread count, weave, finish. Single-needle tailoring, felled seams, and proper interlining cost more than the shortcuts that replace them.
- Trims. Branded vs generic zips and buttons. Woven vs printed labels. The trim card should be identical across quotes.
- AQL and inspection level. The Acceptable Quality Limit — the defect threshold a shipment is inspected against (AQL 2.5 is a common apparel standard). A factory quoting to a looser AQL, or not inspecting at all, will quote cheaper and ship you more seconds.
- MOQ assumptions. A price at 5,000 pieces per colour is not the price at 1,000. If one quote assumes a larger run, it'll look better per piece for reasons that have nothing to do with the factory being cheaper. Make sure both quotes state the quantity and colour break they're costed against. (More on how minimums drive price in our guide to MOQs.)
The trap is the FOB that wins on price by quietly substituting down — a lighter fabric, a cheaper trim, a looser quality standard. It's not always dishonest; sometimes the factory is just quoting the cheapest way to hit a target and assuming you'll spec up later. The version that should worry you is the cheap FOB that hides the substitution to defend a margin — which is harder to pull when you're dealing with the floor directly and the same named partner answers for both the quote and the shipment. Either way, the fix is the same: send a complete tech pack and trim card, and require every supplier to quote against it line for line. With the spec locked, the FOB comparison becomes real.
From FOB to what you actually pay
FOB is your starting cost, not your finished one. To know whether a program works, you have to walk the number all the way to your warehouse: add ocean freight, insurance, duty at your country's rate, brokerage, port and destination handling, and any inland delivery. That total is your landed cost, and it's the only figure worth comparing across suppliers and countries.
This is where a cheap FOB can stop looking cheap. A low FOB from a country with a higher duty rate, or with freight that runs more per container on your lane, can land higher than a slightly dearer FOB from somewhere with a structural tariff advantage. We walk through the full build-up — and where buyers most often under-count — in our piece on landed cost. Read FOB as the first line of that calculation, never the last word.
How we quote at EliteHeights
We quote FOB by default, ex Chittagong, because it's the honest, transparent number and the one most buyers want to plug into their own landed-cost model. Send us a style and a target, and you'll get an indicative FOB by category within one business day — a realistic working range from the floor, so you can see the gap against your current price before either of us commits time to full sampling.
If it's more useful to you, we'll also quote CIF to your port, or build out an indicative landed number with duty and freight included, so you're comparing like for like against what you pay today. Whatever the basis, the spec sits underneath it: fabric, GSM, construction, trims, and AQL stated up front, so the price means something and stays honest when it's time to confirm an order.
We're a family-owned Dhaka woven floor that already produces for brands like Mango, Zara, Tommy Hilfiger, Calvin Klein, LIDL and Peacocks, and you buy direct from that floor — no trading house in the middle, no hidden layer on the number. The FOB you get is a real working price with one honest margin in it, not an opening bid to be negotiated apart, and the same partner stands behind both the quote and the goods that ship against it. If you want to see where your core program lands, request an indicative FOB and we'll come back within one business day with a number you can actually use.