FOB price calculation formula for machinery: FOB = (EXW Ex-factory Price + Domestic Transport Costs + Customs Declaration Fees + Port Miscellaneous Charges) × (1 + Profit Margin). The seller bears all domestic costs until the goods are loaded onto the vessel, at which point the risk transfers to the buyer. Accurate quotations can be obtained by summing these items according to the formula.
I.
Components of FOB Costs
FOB consists of four parts: ① EXW Ex-factory price (price of the equipment itself);
② Transport costs from factory to port (approx. 80 RMB/cbm for full container trucking; approx. 600–1,000 USD for the Yiwu-Ningbo logistics leg for a 20ft container); ③ Warehouse entry/container loading fees; ④ Port miscellaneous charges (THC, documentation, customs declaration fees). The seller is responsible for all costs prior to loading, while ocean freight, insurance, and destination port charges are borne by the buyer (per Incoterms rules).
II.
FOB Quotation Formula and Case Study
Formula: FOB Quotation = (Product Cost + Various Domestic Costs) × (1 + Profit Margin).
Case 1: Equipment cost 900 RMB + domestic transport 60 RMB + customs declaration fee 40 RMB + port handling fee 30 RMB, profit margin 20% → FOB = (900 + 60 + 40 + 30) × 1.2 = 1,236 RMB;
Case 2: Product cost 100 USD + domestic freight 10 USD + customs declaration fee 5 USD + terminal miscellaneous fees 3 USD, profit margin 10% → FOB = (100 + 10 + 5 + 3) × 1.1 = 129.8 USD;
Case 3: Generator set 3,000 USD + domestic freight 120 USD + customs declaration 40 USD + port miscellaneous fees 40 USD, profit margin 15% → FOB = 3,680 USD.
III.
How to Calculate Export Tax Rebates
Export tax rebates reduce actual costs: Actual Cost = Price Including Tax × [1 − Rebate Rate ÷ (1 + VAT Rate)]—For equipment with 13% VAT and a 13% rebate rate: Actual Cost = Price Including Tax × [1 − 0.13/1.13] ≈ Price Including Tax × 88.5%; the rebate is calculated based on the FOB price in RMB multiplied by the rebate rate (manufacturing enterprises use the export invoice FOB value as the basis for tax calculation, per Ministry of Finance and State Taxation Administration Announcement No. 11 of 2026)—calculating the rebate before quoting allows the quote to better reflect the true cost.
IV. Choosing Between EXW, FOB, and CIF
EXW (Ex Works): Price covers the equipment at the factory only; the buyer handles domestic transport and customs declaration (unless you have a domestic freight forwarder). FOB (Free On Board): Price covers equipment, domestic transport, and export clearance up to the point of loading onto the vessel (the top choice for most buyers—allows control over ocean freight and insurance, with transparent pricing). CIF (Cost, Insurance, and Freight): Price covers FOB costs plus ocean freight and insurance (convenient for beginners, but suppliers often add a profit margin to the shipping costs)—for machinery imports, FOB is recommended so you can control shipping (as freight costs make up a significant portion of the total for large equipment).
V.
Key Considerations for Quotations
First, exchange rate validity: specify terms like “based on 1 USD = 7 RMB, valid for 7 days” (standard practice in cross-border trade). Second, packaging: costs for export-grade wooden crates or anti-rust packaging for machinery (volumetric weight applies for large items). Third, overweight/oversized items: fees for port hoisting or special containers (for oversized equipment). Fourth, tax rebate documentation: Proforma Invoice + VAT Invoice (required for customs declaration and tax rebates). Fifth, payment terms: 30% deposit + balance before shipment (for large equipment, common terms are 30/70 or Letter of Credit). Industry experts advise: calculate FOB as (Ex-factory price + domestic transport + customs declaration + port charges) × profit margin;
factor in tax rebates to offset actual costs; choose between EXW, FOB, and CIF based on your shipping control capabilities;
and carefully verify exchange rates, packaging costs, and port charges before issuing a quote.
