FOB (Free on Board)
Customs Valuation · Valuation Basis
What is FOB (Free on Board)?
FOB (Free on Board) is a customs valuation method where duty is calculated only on the goods' transaction value at the port of export - the price paid for the goods themselves, excluding international freight and insurance to the destination.
The United States is the most prominent example of a major destination that values imports on an FOB basis, meaning shipping cost doesn’t directly change the duty bill the way it would under a CIF valuation.
Under FOB valuation, customs only cares what you paid for the item itself at the factory or warehouse door - what you paid to ship it the rest of the way doesn't factor into the tax calculation at all, unlike in a CIF system.
When to Use It
FOB matters when estimating duty for a destination that uses it - since freight and insurance are excluded from the taxable value, only the goods’ own price matters for the duty calculation, even if shipping cost is substantial.
FOB is also a common Incoterm describing who’s responsible for goods at the port of export, which is a related but distinct concept from FOB customs valuation - the terminology overlap causes real confusion, so check which sense a source is using.
Frequently Asked Questions About FOB (Free on Board)
Does FOB valuation mean shipping cost is irrelevant to landed cost?
No - shipping cost still adds to the total landed cost, it just isn’t part of the taxable base duty is calculated on. VAT or sales tax, where it applies, may still include shipping in its own base even when duty doesn’t.
Is FOB the same in customs valuation and in shipping terms?
They’re related but not identical. FOB as an Incoterm defines when risk transfers from seller to buyer during shipping; FOB as a customs valuation method defines what’s included in the taxable value for duty. The US uses the latter sense for import duty.
Which destinations use FOB valuation for customs duty?
The United States is the clearest example among the destinations this site documents - duty there is calculated on the goods’ price at export, not the CIF value the EU and UK use.
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