FOB vs CIF: Which Value US Customs Actually Taxes
Last updated October 9, 2026·By the ExportSonar team
Short answer: the United States does not assess duty on CIF. The appraised value of imported merchandise starts from the transaction value — the price actually paid or payable when sold for exportation to the US — which the statute defines exclusive of costs for international transportation, insurance and related services. In practice you declare an FOB-equivalent value and add back only the specific statutory additions such as packing, selling commissions, assists and royalties.
Sellers quote prices under trade terms — FOB, CIF, DDP and their siblings — that allocate who pays for carriage and who bears risk along the way. Importers are often surprised that the term printed on the commercial invoice does not determine what CBP taxes. That is because customs valuation is governed by statute, not by the contract's delivery term. Understanding the split between the two concepts keeps your declared value defensible at any port of entry.
The statutory rule: transaction value, minus international carriage
Section 1401a of title 19, United States Code, sets the hierarchy of valuation methods: transaction value first, followed in order by the transaction value of identical merchandise, similar merchandise, deductive value, computed value, and a fallback. Transaction value governs most commercial imports, and its core definition reads:
"Price actually paid or payable" means the total payment … exclusive of any costs, charges, or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation in the United States.
Two features matter for everyday compliance. First, the exclusion covers international leg charges only — inland haulage inside the US after arrival is simply outside dutiable value, while domestic-at-origin trucking to the port is part of the goods' price. Second, the statute then adds back a closed list of items in §1401a(b)(1): packing costs incurred by the buyer, selling commissions, the apportioned value of assists, royalties or license fees required as a condition of sale, and any resale proceeds accruing to the seller.
What this means for FOB invoices
An FOB (free on board) invoice prices the goods through loading at the origin port, before international carriage. That aligns almost perfectly with the statutory concept: goods price plus eligible additions, international freight and insurance excluded. If you buy FOB origin, your declared value usually equals the invoice line for the merchandise, adjusted only where one of the five statutory additions applies — most commonly assists (tooling or components supplied free of charge by the buyer) and royalties.
What this means for CIF invoices
CIF (cost, insurance and freight) bundles international carriage into the invoice price. Because the statute excludes those components, you cannot declare the CIF total. Convert before filing: start from the CIF amount, subtract the documented freight and insurance attributable to the international leg, and the remainder becomes your transaction-value base — an FOB-equivalent figure. Keep the carrier's and insurer's documentation; the burden of substantiating any deduction sits with the importer. Some other WTO members appraise on CIF bases, so exporters selling into multiple markets should expect different dutiable values for the same shipment — another reason landed-cost models must be market-specific rather than global constants.
| Invoice term | Includes intl. freight? | Incl. intl. insurance? | US dutiable base |
|---|---|---|---|
| FOB origin port | No | No | Goods price (+ statutory additions) |
| CIF destination | Yes | Yes | CIF − documented freight − documented insurance |
| EXW works | No (but origin-side handling priced in) | No | Goods price incl. origin-side delivery to port if charged |
A worked example (illustrative arithmetic)
Suppose you buy machinery parts CIF Long Beach at $10,800, comprising $10,000 of goods, $600 ocean freight and $200 cargo insurance. The dutiable base is $10,000 (plus any statutory additions). If the applicable HTS rate for your classification were 5%, duty would be $500 — not $540 — and the difference grows with every heavy, cheap-per-kilo product. When the rate also carries a specific component per unit, quantity matters alongside value, which is exactly what our tariff calculator computes from your HTS code, origin and shipment value.
Fact block — the three levers of landed cost: (1) classification — see how to find the right HS code; (2) valuation — this page; (3) additional measures such as the China Section 301 duties covered in our Section 301 guide. Change any one of the three and the duty owed changes even though the shipment itself did not.
Frequently asked questions
Does US customs duty apply on top of freight?
No. Under 19 U.S.C. §1401a the price actually paid or payable excludes costs for international transportation, insurance and related services, so duty applies to the goods value without those charges.
My invoice is CIF. Can I use it as the customs value?
Not directly. You must deduct the international freight and insurance components back out and declare the FOB-equivalent transaction value, adding only the items listed in §1401a(b)(1).
Are FOB and Incoterms the same thing?
No. Incoterms are contract delivery terms published by the International Chamber of Commerce that allocate cost and risk between seller and buyer; customs valuation is a separate statutory calculation.
References
- 19 U.S.C. §1401a — Value (statutory text incl. the "price actually paid or payable" definition) — law.cornell.edu/uscode/text/19/1401a (retrieved 2026-10-09)
- USITC, Harmonized Tariff Schedule (HTS) search portal — hts.usitc.gov (retrieved 2026-10-10)
- International Chamber of Commerce, Incoterms® rules overview — iccwbo.org (retrieved 2026-10-09)