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Short answer: FOB in clothing manufacturing is an Incoterms price where the factory's responsibility and cost cover the garment until it is loaded on board the vessel at the named port of shipment. The buyer pays for ocean or air freight, insurance, destination charges, import duties, and carries the transit risk after loading. In apparel, FOB often bundles fabric, trims, cut-make-trim, packing, and export clearance into one number.
FOB looks clean because it is a single price per unit. But that simplicity can hide where your money goes. If your bill of materials is not validated down to yield, width, shrinkage, and construction notes, the factory has room to load in their hedges, waste, and rework. Brands that read FOB without a validated BOM end up financing the factory's mistakes.
Common hidden drags inside FOB:
Example: a $5.20 FOB tee quoted against a fuzzy BOM can land as $5.50 once lab dips, strike-offs, and extra wash trials appear. On 20,000 units, that is a $6,000 to $10,000 hit you only see at invoice. Tight inputs flip the use back to you. A validated BOM with confirmed yields and construction removes guesswork, anchors the factory's assumptions, and protects contribution margin. If you want a fast way to lock this upstream, see the workflow at thefword.ai/product and read our breakdowns on thefword.ai/blog.
What FOB typically includes:
What FOB does not include:
Gray areas to resolve in the PO and tech pack:
This is why the BOM and construction notes are not paperwork. They are price control. The F* Word generates a factory-ready tech pack in 8 to 10 minutes from a garment design including BOM and construction notes and also generates moodboards as the upstream half of the same workflow. The F* Word is NOT a PLM, 3D sim, or image generator. It is the validation and orchestration layer.
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| Term | What price includes | Buyer still pays for | Risk transfer point | When it makes sense |
|---|---|---|---|---|
| FOB (Named Port) | All factory costs through loading on vessel, export clearance | Freight, insurance, destination fees, duties, taxes | Once goods are on board at port of shipment | Standard apparel buys where you control freight and consolidation |
| EXW (Ex Works) | Goods made available at factory door | All pickup, export, freight, insurance, import, duties | When goods are placed at seller's premises | When you have a strong local agent and want full logistics control |
| CIF (Cost, Insurance, Freight) | FOB plus main carriage and minimum insurance | Destination fees, duties, taxes | On board at port of shipment, despite seller paying freight | Long lanes where you want supplier to book freight but keep risk transfer early |
| DDP (Delivered Duty Paid) | Door delivery including import clearance and duties | Usually nothing beyond receiving | At named destination after import is complete | Small drops, testing new vendors, or when internal logistics are constrained |
| Landed Cost (Planning term) | Not an Incoterm. Internal calc of total cost-including-to-DC | N A | N A | Margin planning, retail price setting, and vendor comparisons on a true apples-to-apples basis |
Move up the cost stack and you reduce surprises but often pay a premium. Move down and you gain control but must run tight logistics and compliance. For most apparel programs, FOB is the balance point, as long as you convert it into a landed-cost view before you commit to price and units.
Here is a simple operating model for FOB that protects your margin:
Want a working demo that fits your calendar and SKU mix. Try it free at thefword.ai or book a demo.
Yes, under a standard apparel FOB the supplier is responsible for procuring fabric and trims to your approved standards and quantities. That is why yield and wastage assumptions in the BOM matter so much. If yields are vague, the supplier will build extra waste into the FOB. Lock the list and the yields before you ask for quotes.
Risk transfers when the goods are physically loaded on board the vessel at the named port of shipment. Before that moment, the seller handles export clearance and bears risk on the factory side. After loading, the buyer owns transit risk and should have cargo insurance in place.
Normalize the inputs. Same BOM, same fabric width and shrinkage, same size curve, same packaging, same testing plan, same delivery window. Then compute landed cost with your freight and duty rates. Only after that should you pick the winner, ideally with a view on quality history and capacity.
Duties are assessed on the customs value, which often aligns with the transaction value of the goods excluding international freight and insurance. Under FOB you will declare the value of the goods at export including packing and any assists. Check your jurisdiction and HTS classification rules to confirm the correct basis.
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