What Is FOB Price? Shipping Terms for Pakistani Buyers
By Sameel Hayat
Co-founder, Markaz ·
FOB price means Free On Board. It is what a supplier charges to make your goods, truck them to their nearest port, clear them for export and load them onto the ship. That is where their job ends. Sea freight, insurance, Pakistani customs duty and sales tax, your clearing agent, port charges and the last van to your door are all yours.
So an FOB quote is not the price of goods in Pakistan. It is the price of goods on a boat in China. Resellers who hold an FOB number up against a local wholesale rate are comparing two different things, and that gap is where a first import loses its margin.
If you would rather not learn incoterms at all, that is the other route: Markaz China quotes in PKR with freight, duty and clearance already inside the number, no minimum order, and roughly 10 to 17 days to your door.
What FOB price actually covers
Free On Board is one of the Incoterms — the standard trade terms that decide, line by line, who pays for what and at which point the risk passes from seller to buyer. FOB sets that point at the ship's rail in the seller's port.
Under an FOB quote the supplier pays for and handles:
- Manufacturing the goods and packing them for export.
- Inland transport from the factory to the port of loading — FOB Shenzhen, FOB Ningbo, FOB Guangzhou. The port is part of the term, which is why it is always named.
- Export clearance and the Chinese-side paperwork.
- Terminal handling at that port, and loading the cargo onto the vessel you nominated.
From the moment the goods are on board, everything is on your account: the sea leg, marine insurance, arrival at Karachi, duty and taxes, clearance, delivery onward. The risk transfers at the same point as the cost, which matters more than it sounds. If a container goes overboard mid-ocean on an FOB shipment, it is your loss and your insurance claim, not the supplier's.
That is the whole mechanism. FOB is not a discount or a grade of service. It is a line drawn on a map, and the only question that matters is how much of the journey sits on your side of it.
The four terms a supplier will quote you
Ask three factories for a price and you can get three terms back. They are not comparable until you convert them to the same basis.
| EXW | FOB | CIF | DDP | |
|---|---|---|---|---|
| Stands for | Ex Works | Free On Board | Cost, Insurance and Freight | Delivered Duty Paid |
| Price gets you as far as | The factory gate | Loaded on the ship in China | The destination port | Your address |
| Inland transport in China | You | Supplier | Supplier | Supplier |
| Export clearance | You | Supplier | Supplier | Supplier |
| Sea freight and insurance | You | You | Supplier | Supplier |
| Pakistani duty, taxes, clearance | You | You | You | Supplier |
| Delivery to your door | You | You | You | Supplier |
Read the bottom three rows and the pattern is obvious: the cheapest-looking quote is the one that covers the least. EXW undercuts FOB because it stops earlier. FOB undercuts CIF for the same reason. None of them is a better deal; they are different lengths of the same journey.
Two practical notes. CIF still leaves duty, taxes and clearance with you, so a CIF price is not a landed price either — people get caught by this constantly. And DDP looks like the easy answer, but it hands your customs declaration to a supplier whose incentive is to declare a low value. That exposure is yours, not theirs.
What sits between FOB and your storeroom
This is the part an FOB quote is silent about. Every line below is real and every one of them is yours to pay:
- Sea or air freight. A full container, a share of one (LCL), or air cargo if the goods are light and urgent. Rates move with the season and with fuel, so a quote from three months ago is a guess.
- Marine insurance. Optional in the sense that nobody forces you. Skip it and you are self-insuring a container.
- Customs duty. Set by your product's HS code, not by what you paid. Two items that look alike in a catalogue can sit in different tariff lines.
- Sales tax and the other levies assessed at import, on top of duty.
- Port and terminal charges at Karachi, plus demurrage if the container sits longer than its free days while paperwork catches up.
- Your clearing agent. A practical necessity for a first-time importer, and a line on the invoice.
- Inland freight from the port to Karachi, Lahore, Faisalabad or wherever the stock actually lives.
- Bank and currency costs. The telegraphic transfer, the spread on the rate, and the days between paying in dollars and selling in rupees.
- Inspection or testing where your category needs a certificate before it clears.
Add them up and divide by the number of units. That figure — landed cost per unit, in PKR — is the only number worth comparing against a local wholesale price. The FOB number tells you almost nothing on its own. Our walkthrough of how to import products from China to Pakistan covers the sequence these charges arrive in, and how long China-to-Pakistan delivery takes covers the weeks they arrive over.
Why the cheapest quote usually covers least
Suppliers are not hiding anything when they quote FOB. It is the default in Chinese export trade because it splits the job at a clean point: they know their own port, you know your own country. The confusion is on the buying side, and it has a shape.
A new importer asks four suppliers for prices. Three come back FOB, one comes back EXW because that factory does not handle export. The EXW number is lowest, so it wins. Then the trucking, the export clearance and the port handling that the other three had folded in turn up as separate invoices, and the cheapest supplier becomes the most expensive one.
The fix is a habit, not a spreadsheet: before you compare anything, write every quote on the same basis. Convert them all to landed cost per unit in PKR, or at minimum to the same incoterm. A quote without a term attached is not a quote — ask which one it is before you reply.
The landed-cost worksheet
One page, per unit, in PKR. We are not going to put numbers in it, because real rates depend on your product's HS code, your volume, your route and the month — any figure printed here would be a decoration. Fill it in with quotes you have actually been given:
- FOB price per unit — converted to PKR at the rate you will really pay, not today's headline rate.
- Freight per unit — total freight quote divided by units in the shipment. This is where small orders get punished, because the freight does not shrink with your order.
- Insurance per unit.
- Duty and taxes per unit — from your clearing agent, against your actual HS code.
- Clearance, port and agent fees per unit.
- Inland delivery per unit.
- Bank charges and the currency spread per unit.
- A wastage allowance — the units that arrive damaged, wrong or unsellable. Assume some. First shipments teach this lesson for free only once.
The sum is your landed cost. Now put the local wholesale price for the same item next to it. Sometimes importing wins by a wide margin. Sometimes it wins by so little that the eight weeks of your attention were the real cost. Either answer is useful; guessing is not. If you want the margin maths from the other end, the factory-price wholesale guide works back from what you can sell at.
When FOB is the right term to ask for
FOB is not a trap. For some buyers it is the best of the four, and the test is whether you control the freight leg better than the supplier does.
Ask for FOB when you ship often enough to have your own freight forwarder and your own rates — then taking the sea leg yourself is usually cheaper than letting the factory mark it up. Ask for it when you are consolidating goods from several suppliers into one container, because each of them only has to get its cargo to the same port. And ask for it when you want sight of the real freight cost, since an all-in CIF or DDP number hides whether the saving is in the goods or the shipping.
Ask for CIF or DDP instead when this is your first import, when the order is small enough that arranging freight costs more in time than it saves in money, or when your cash cannot sit in a container for weeks while you learn the process. There is no shame in buying the easier term for shipment one. The expensive mistake is buying the cheapest term and discovering what it excluded.
And when you are still choosing a supplier rather than a term, ordering from Alibaba to Pakistan sets out the steps in order, while the Alibaba alternatives comparison covers the routes that skip the import entirely.
Questions to ask before you accept a quote
Six questions, in a message you can paste. The answers are worth more than another round of price haggling.
- Which incoterm is this, and which port? "FOB" alone is incomplete. FOB Shenzhen and FOB Qingdao are different prices for you.
- What is the minimum order at this price, and what changes at the next tier?
- What is the HS code you declare this under? You need it to get a duty figure from your agent, and the supplier already knows it.
- Is export packing included, or extra? Cartons, pallets and shrink wrap are sometimes quoted separately.
- What is the lead time from deposit to loaded on board? Production time and shipping time are two different waits, and only the second one is in the freight quote.
- Will you ship one unit as a sample on the same terms? A supplier who will not send one before you commit to a container is telling you something.
Where Markaz fits
Everything above is the importer's job. Most Pakistani resellers do not need that job, and it is worth being plain about which part Markaz replaces.
It removes the incoterm entirely. On Markaz China the price you see is in PKR with freight, duty and clearance already inside it, for the quantity you actually want. There is no MOQ to clear, no forwarder to book, no HS code to look up and no agent at the port. Roughly 10 to 17 days and it is at the door. That is not a cheaper FOB price — it is a landed price, which is the number you were trying to calculate in the first place.
It lets you test before you import. The reason landed cost matters is that you are betting cash on a product selling. You can take that bet off the table: resell from the Markaz catalogue first with no stock of your own, cash on delivery for your customer and 3 to 5 days inside Pakistan. If the product moves, you have measured demand before anybody quotes you a container. Reselling on Markaz is the no-capital version of that test, and sourcing from China one unit at a time covers the single-unit route in detail.
It still makes sense to learn the terms. If a product sells well enough that you eventually want your own container, you will be quoted FOB and you should understand it. Plenty of sellers run both: landed stock through Markaz for the long tail, a direct import for the one product they know sells. When you are comparing who ships what, the Markaz supplier list and the Markaz China categories are the places to look first.
Frequently asked questions
What does FOB price mean?
Free On Board: the price of your goods loaded onto the ship at the supplier's port, with export clearance done. It excludes sea freight, insurance, Pakistani duty and taxes, clearance and delivery. Risk passes to you at the ship's rail.
Is FOB cheaper than CIF?
The number is lower, because it covers less. CIF adds freight and insurance to the destination port, so the supplier pays those and includes them in the price. Whether FOB works out cheaper depends on whether your own freight rate beats the supplier's markup. For a first shipment it usually does not.
Does FOB include customs duty in Pakistan?
No. No incoterm except DDP covers import duty and taxes in the destination country. Even CIF leaves duty, sales tax and clearance with the buyer. Duty is assessed on your product's tariff classification and declared value, so get the figure from a clearing agent before you commit.
What is the difference between FOB and EXW?
EXW is the factory gate: you arrange collection, inland transport and export clearance yourself. FOB moves all three onto the supplier and ends at the ship. An EXW price is always lower and almost always the harder deal for a buyer who is not already shipping regularly.
Why do suppliers quote FOB a particular city?
Because the named port is part of the term. It tells you where the supplier's responsibility ends, and it changes your freight cost: a container from one Chinese port to Karachi does not cost the same as from another. Always get the port with the price.
Do I need to understand incoterms to buy from China?
To import yourself, yes — they decide who pays each line and where your risk starts. To sell Chinese products in Pakistan, no. Buying through a platform that lands the goods and quotes you one PKR price means the terms were somebody else's problem.
The short version: FOB is a starting line, not a price tag. Get every quote onto the same basis, work out landed cost per unit before you compare anything, and be honest about whether running an import is the business you wanted or just the one you ended up in.
