What is FOB? What does the FOB price include?

What is FOB?

FOB, commonly known as "free on board", is the most common price term in international trade. Generally speaking, under FOB terms, the seller bears all risks and costs before the goods are loaded on board, and the buyer bears all risks and costs thereafter. Therefore, the FOB price does not include freight, insurance and other expenses. Many export companies therefore believe that it is simpler to adopt FOB terms, as long as the goods are loaded on board, they have nothing to do with them. Therefore, they are more willing to trade at FOB prices during negotiations.

What does the fob price include?

1. For factories:

FOB={{1-[tax refund rate/(1+VAT rate)]} * RMB price including tax}/spot purchase price

Formula analysis: FOB = (RMB tax-inclusive price - tax refund income) / exchange rate

Among them: Tax refund income = RMB tax-inclusive price × [tax refund rate/(1+VAT rate)]

Then: FOB = {RMB price including tax - {RMB price including tax × [tax refund rate / (1 + value-added tax rate)]}} / exchange rate

FOB = {{1-[tax refund rate/(1+VAT rate)]} × RMB price including tax}/exchange rate

2. For foreign trade companies:

FOB={{{1-[tax refund rate/(1+VAT rate)]}×RMB purchase price including tax}+profit}/spot purchase price

Or: FOB = {{1-[tax refund rate/(1+VAT rate)]} × RMB purchase price including tax}/[spot purchase price×(1+profit rate)]

This is the end of the introduction to FOB in this issue. If you want to get more information about FOB, please pay attention and we will continue to answer your questions~