FOB Port of Loading: Why Terminal Choice Changes Your Cost

You quote "FOB Shanghai." The buyer agrees. Weeks later, the buyer's carrier tells you to deliver to Yangshan. You quoted based on Waigaoqiao — 120 km closer to your factory.

Under FOB, that extra trucking is your cost. This guide explains why the terminal within the port matters as much as the port name itself, and how to avoid pricing mistakes before you ship.

What does "port of loading" actually mean under FOB?

Under FOB (Free on Board), the seller is responsible for delivering goods on board the vessel at the named port of shipment. That includes inland transport to the port, export customs clearance, origin terminal handling, and loading. Once goods are on board, the buyer takes over all costs and risks.

But "port" is not as simple as a city name. According to the International Chamber of Commerce (ICC), FOB must be used with a named port of loading — and the Incoterms 2020 rules go further. Article B10 states the buyer must notify the seller of "the specific place and point within the port" and the vessel name, in sufficient time.

Many ports consist of multiple terminal areas spread across a wide geography. When the contract says "FOB Shanghai" without specifying which terminal, the seller is left guessing where to send the truck.

Why does the specific terminal matter for your cost?

The terminal your goods go to determines your inland trucking distance and cost. For ports with multiple terminal zones, the difference can be significant.

Shanghai is a clear example. The Port of Shanghai — the world's busiest container port, handling over 49 million TEUs in 2024 according to Shanghai International Port Group (SIPG) — operates three major container terminal areas:

• Waigaoqiao: Located in Pudong, near Shanghai's urban center. Handles trade routes to Southeast Asia, Japan, South Korea, and Australia.

• Yangshan Deep-Water Port: Located on offshore islands, connected to the mainland by the 32 km Donghai Bridge. Handles routes to Europe, the Mediterranean, South America, and Africa.

• Wusong: Primarily handles domestic feeder services.

According to Asian Tigers China, a logistics firm operating in the region, the distance from Waigaoqiao to Yangshan is approximately 120 km (75 miles), taking 3 to 4 hours by truck. That's within the same "port" — Shanghai.

If the seller quotes FOB based on delivering to Waigaoqiao, but the buyer's carrier loads at Yangshan, the seller absorbs the extra 100+ km of trucking. On a per-container basis, inland transport cost differences of $100–$200 are common between terminal areas in the same city, according to freight rate comparisons from logistics providers in the Yangtze River Delta region.

What happens when the buyer doesn't specify the terminal?

When the buyer doesn't name a specific terminal, the seller takes the risk of misquoting. The typical sequence works like this:

• Seller quotes "FOB Shanghai" based on the nearest or most commonly used terminal.

• Buyer agrees to the price.

• Buyer's carrier books space on a vessel that loads at a different terminal.

• Seller must deliver to the carrier's assigned terminal — not the one used to build the quote.

According to Maersk's official Incoterms guide, "failure to specify a full address may cause a dispute" because it allows either party to choose any delivery point within the general location. For FOB specifically, the Shipping and Freight Resource notes that not specifying the terminal can lead to the cargo being delivered to the wrong location, resulting in cost implications and delays.

Incoterms 2020 does provide a safety net — but only if both parties know about it. Under Article B10, the buyer is required to notify the seller of the exact loading point and vessel. If the buyer fails to do so and the goods cannot be loaded, the risk shifts to the buyer from the agreed delivery date. Additionally, if the buyer initially names one loading point but changes it later, ICC rules state the seller is not obligated to cover the extra cost, as long as the seller followed the buyer's original instructions.

In practice, most sellers don't invoke this rule. They absorb the cost to keep the relationship intact — and lose margin on every shipment.

How should exporters write FOB in contracts and quotations?

Specify the terminal, not just the city. A precise FOB term removes ambiguity from your quote and protects your margin.

Here's the difference:

• Vague: "FOB Shanghai, Incoterms 2020"

• Specific: "FOB Shanghai, Yangshan Terminal, Incoterms 2020"

When you name the terminal, your inland trucking quote matches the actual delivery point. If the buyer's carrier assigns a different terminal, the cost difference becomes a documented negotiation — not a hidden loss.

This applies to any port with multiple terminals. According to CBRE's 2022 Global Seaport Review, Shanghai's three container port areas have a combined quay length exceeding 13 km across 43 berths. But Shanghai is not unique. Busan, Rotterdam, Los Angeles–Long Beach, and Singapore all operate multiple terminal zones with meaningful geographic spread.

For exporters quoting FOB regularly, these practices help:

• Name the terminal in every FOB quote. If you don't know the buyer's carrier yet, state the terminal your price is based on.

• Add a clause for terminal changes. "If the loading terminal differs from the above, inland transport cost will be adjusted accordingly."

• Ask the buyer to confirm the carrier and vessel early. Incoterms 2020 requires this — you're simply enforcing the rule.

• Keep a terminal cost matrix. For your most common port, maintain a table of trucking costs per terminal so you can adjust quotes quickly.

Does this apply to container shipments too?

Yes — and it's worth noting that the ICC recommends FCA (Free Carrier) instead of FOB for containerized cargo. Under FOB, the seller's delivery obligation ends when goods are loaded on board the vessel. But with containers, goods are typically delivered to a terminal days before loading. The seller has no control over when or how the container is placed on the vessel.

According to Trade Finance Global, the Incoterms 2020 Explanatory Notes state that FOB should only be used when "the parties intend to deliver the goods by placing the goods on board a vessel" — which doesn't match how container terminals operate. FCA allows risk to transfer at the actual handover point, such as the container terminal gate, which is cleaner for both parties.

However, FOB remains widely used for containers in practice, particularly on Asia-to-US and Asia-to-Europe trade lanes, because many Letters of Credit require a Bill of Lading with an "on board" notation. Incoterms 2020 addressed this by introducing a provision under FCA that allows the buyer to instruct the carrier to issue an on-board B/L to the seller — bridging the gap between FCA and L/C requirements.

Regardless of whether you use FOB or FCA, the terminal specification problem is the same. Name the terminal. Price accordingly.

Quick reference: FOB port of loading checklist

• Write the terminal name in your FOB term, not just the city

• State which terminal your quote is based on

• Include a clause for terminal change cost adjustments

• Request the buyer's carrier and vessel details early

• Maintain a trucking cost matrix per terminal for your main ports

• Consider FCA for container shipments — Incoterms 2020 now supports on-board B/L under FCA