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Calculation of FOB Value

Ankur (Work) (70 Points)

27 November 2009

I want to know as to how to calculate the FOB Value? We need to submit a report to our association in which we should indicate the FOB value of sales. We invoice our customer in USD and also includes postage and packing charges in USD in the invoice. for eg.

Product USD 1000.00

Postage and packing USD 150.00

Total USD 1150.00

In this case, we do not pay USD 150 but we pay Rs. 5000/- for postage. Please guide.

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14 Replies

(Guest)

Determine Export Shipping Cost

a. Use your above Ex Works Price .......................... = RM ?

b. Add Local Inland Freight Wharfage Charge etc. ... = RM ?
========
Total it up and this is now your FOB price

c. Add Ocean/Air Freight Marine Insurance ............... = RM ?
==========
Total it up and this is now your CIF price

Ankur (Work) (70 Points)
Replied 27 November 2009

Thanks Rajesh for the information. We sell product on CIF basis but our association is asking for a report of FOB value of sales. Through various guidance, I am confused which of the following option is correct for the example that I gave (presuming that the customs exchange rate is 1 USD = 46.40 INR):

Option (A) FOB Value = Value of Product x Exch. rate

= USD 1000 x 46.40

= INR 46400.00

Option (B) FOB Value = Total Bill value (incl. postage charged) x Exch. rate - Actual postage paid

= USD 1150 x 46.40 - Actual postage paid

= INR 53360.00 - INR 5000

= INR 48360.00

Originally posted by :Rajesh

FOB. A shipping term which indicates that the supplier pays the shipping costs (and usually also the insurance costs) from the point of manufacture to a specified destination, at which point the buyer takes responsibility.

Determine Export Shipping Cost
a. Use your above Ex Works Price .......................... = RM ?
b. Add Local Inland Freight Wharfage Charge etc. ... = RM ?
                                                                                               ========
                         Total it up and this is now your FOB price
c. Add Ocean/Air Freight Marine Insurance ............... = RM ?
                                                                                         ==========
                         Total it up and this is now your CIF price

(Guest)

Just Take shipping bill, refer FOB value and make the report. you will also find exchange rate in shipping bill and you can use that also

>> Rajesh

RAMESH KUMAR VERMA ( CS PURSUING ) (43848 Points)
Replied 14 December 2009

fob = (cost of freight l) (-) present value of sold the goods., which is convert after in free foreign currency.

as freight is 10,00 in inr

and costo off goods is 10,00,000

fob =10,00,000.00(-)9,90,000

thanks

1 Like

Suryakanth Subramaniam (4 Points)
Replied 30 May 2018

Transportation up to Customs + Customs clearance + unloading charges + Loading Charges + Local Insurance = FOB.

Eg: if no insurance and While loading on ship vessel if the crain pully wire breaks and your consignment falls in sea then risk will be yours. Once your consignment is loaded on the vessel only then you are Free, that means FOB = Free on Board.

In more detail: Ex factory price is 10 lakhs

Transportation up to Customs eg: 22,000/-

contingency insurance 0.1% that is =10,000/-

+ Customs clearance approximate =4000- (Depends on commodity & Package condition)

+ unloading charges from your truck =4000/-

+ Loading Charges on ship vessel = 4000/- is equal to = FOB Price.10,44,000/- Approximately calculated, just for understanding.

By Suryakanth Subramaniam

CS M Pota (Company Secreatary) (3180 Points)
Replied 01 June 2018

Dear Ankur,

This is very simple.For calculation of FOB you need to add all the expenses from your factory or godown or storage place upto loading of the goods onto the vessel or Aricraft if export is by Air.These total expenses you need to add in your Manufacturing cost of the goods + your profit.

FOB includes the expenses to be incurred pre as well as Post shipment expenses but does not include Freight, Insurance after loading of the goods on to the vesse; or Air craft.

vijay valiya (2 Points)
Replied 12 June 2019

thanks sir

Raghuvaran Bhupathi (6 Points)
Replied 25 November 2020

Invoice calculate how to prepare

Indira Priyadarsini Kota (Practice) (590 Points)
Replied 19 January 2021

Can anyone tell me the difference between CIF and FOB price?

Raghuvaran Bhupathi (6 Points)
Replied 20 January 2021

It's very useful sir how to prepare invoice

CS M Pota (Company Secreatary) (3180 Points)
Replied 21 January 2021

FOB stands for Free ON Board which means the manufacturer or exporter is responsible to load onto the ship or Air craft and pay all the expenses till loading of the goods..So FOB means( expenses for manufacturing of the finished good or buying of the finished goods+ expenses till loading of the goods onto ship or Air craft+Profit)

CIF Stands for Cost Insurance and Freight: If you add Insurance of the goods to be exported from your factory/ stores to port of Discharge ( port where export is to be effected)+Sea or Air freight from the Port of loading to Port of Discharge,

Ayushi Arora (298 Points)
Replied 12 February 2021

difference between two widely used Incoterms - Cost, Insurance, and Freight (CIF) and Free on Board (FOB).

Cost, Insurance, and Freight (CIF) and Free on Board (FOB) are international shipping agreements used in the transportation of goods between a buyer and a seller. Both contracts specify origin and destination information that is used to determine where liability (transfer of risk) officially begins and ends. Both apply to calculating the garment’s cost and the garment’s price. To the cost in terms of shipping from supplier to the manufacturer. To the price in terms of shipping from the manufacturer to the retailer (often retailers cover these expenses).

Why buy FOB?

Buying Free On Board simply has two major benefits over CIF.

You have better control of the freight and the freight cost. The cost is always important and you will have a better chance of gaining a more competitive freight rate. Using your own freight forwarder will help you obtain more accurate information in a timely manner.

They can assist you better once a problem arises. The logistic partner you choose always works together with you for your best interest, not your suppliers.

Vaishnavi Kharvi (2 Points)
Replied 20 October 2021

Ex- work - 25000, packing cost- 2000, transportation- 3000

Export profit excepted- 10%,. Export incentive earned - 25 %

Calculate the fob

For this we should add incentive earned also

rajeev yadav (2 Points)
Replied 15 May 2023

Calculating freight rates involves considering several factors that contribute to the overall cost of shipping goods. While there are different methods and variables involved depending on the specific context, I'll provide you with a general overview of the key factors to consider when calculating freight rates.