Duty and Tax Calculation Methods

There are two generally accepted methods for calculating duty rates: CIF and FOB. Most countries use the CIF method. Some exceptions may apply. VAT (Value Added Taxes) are generally applied on the CIF or FOB + Duty value. The figures used below are for example only. For questions about duty and tax calculation call 1-800-USA-TRAD(E).

CIF (Cost, Insurance, Freight) A pricing term indicating that the cost of goods, insurance, and freight are included in the quoted price. Duty is calculated by adding all costs together. See below for example.*

Invoice Value
Insurance Paid
Freight Paid
Total CIF Value
Duty Rate = 7%
Duty Charge
Total CIF+Duty Value
VAT = 18%
VAT Tax Charge
CIF+Duty+VAT

$932
$16
$52
$1000
x .07
$70.00
$1070.00
x .18
$192.60
$1262.60

FOB (Free on Board) A pricing term indicating that the cost of the goods, including all transportation and insurance costs from the manufacturer to the port of departure, as well as the costs of loading the vessel, are included in the quoted price. It should be noted that the Incoterm FOB applies only to shipments via sea or inland waterway transport. For the purpose of calculating duties and taxes for international shipments, the term FOB generally applies to the commercial invoice value and does not include the cost of shipping and insurance. See below for example.*

FOB Value
Duty Rate = 7%
Duty Charge
Total FOB + Duty Value
VAT = 18%
VAT Tax Charge
FOB+Duty+VAT

$932
x .07
+ $65.24
997.24
x .18
$179.50
$1176.74

* NOTE: The information presented above is for example only. The duty and tax rates listed above are not specific to any HS (harmonized system) number or country.