FOB vs CIF: Who Pays Import Duty? (2026)
The buyer pays import duty under both FOB and CIF; only DDP shifts duty to the seller. But CIF raises the dutiable value in countries that assess duty on CIF rather than FOB. Valuation basis by market, with a worked example.
The buyer pays import duty under both FOB and CIF. Neither rule moves duty liability to the seller; only DDP does that. CIF can still raise the duty bill, because most countries assess duty on the CIF value, so freight and insurance become part of the dutiable value.
That single caveat is where most free comparison pages stop short. The Incoterm decides who is contractually responsible for clearance and duty. National valuation law decides what number the duty rate is applied to. Those are two different questions, and getting only the first one right is how importers are surprised by a duty invoice that is several percent higher than their model.
What each rule actually says
Under Incoterms 2020 rule B7 the buyer carries out and pays for import clearance formalities under EXW, FCA, FAS, FOB, CFR, CIF, CPT, CIP, DAP and DPU. Under DDP, rule A7 moves that obligation to the seller, who must be able to act as importer of record in the buyer's country. DAP and DPU are frequently misread as duty-paid terms: the seller delivers to the destination, but the buyer still clears and pays duty.
Valuation basis by market
The table below is the part that changes the money. It shows whether duty is assessed on the CIF value or on an FOB basis in the main importing markets.
| Market | Duty assessed on | Notes |
|---|---|---|
| United States | FOB (transaction value) | International freight and insurance excluded; MPF 0.3464% and HMF 0.125% apply separately. |
| European Union | CIF at the EU frontier | Freight and insurance to the place of introduction are additions under UCC Art. 71. |
| United Kingdom | CIF at the UK frontier | Same additions as the EU; import VAT charged on the duty-inclusive value. |
| India | CIF plus 1% landing charges basis | BCD, then Social Welfare Surcharge, then IGST on the cumulative value. |
| China | CIF | Duty then VAT on duty-inclusive CIF. |
| GCC (UAE, Saudi Arabia) | CIF | 5% common external tariff on most lines, then VAT. |
| Brazil | CIF | II, IPI, PIS/COFINS and ICMS stack on the CIF value. |
| Australia, New Zealand, Canada | FOB | Freight and insurance outside the dutiable value; GST base differs from the duty base. |
Worked example: the same cargo, FOB and CIF
Goods value USD 100,000. Ocean freight USD 4,000. Cargo insurance USD 250. Duty rate 6.5%. Import VAT or GST 20%.
| Line | Sold FOB into the EU | Sold CIF into the EU | Sold CIF into the USA |
|---|---|---|---|
| Dutiable value | 104,250 | 104,250 | 100,000 |
| Duty at 6.5% | 6,776.25 | 6,776.25 | 6,500.00 |
| Import VAT / GST at 20% | 22,205.25 | 22,205.25 | n/a |
Note what does and does not change. In the EU the dutiable value is the CIF value either way, because freight and insurance to the frontier are statutory additions even when the seller invoiced FOB. In the United States the same cargo sold CIF is appraised on the FOB element, so the duty base stays at 100,000 provided freight and insurance are itemised on the invoice. In both cases the buyer, not the seller, pays the duty.
When duty really does move to the seller
Only DDP. The seller must then be registered or represented for import in the destination country, must be able to recover or absorb import VAT, and carries the tariff-change risk between quotation and arrival, which in 2026 includes US Section 301 and Section 232 actions and reciprocal tariff measures. That risk is the reason most exporters price DDP at a premium or refuse it.
Checks before you quote
- Confirm the valuation basis in the destination country, not the Incoterm, before modelling duty.
- Itemise freight and insurance separately on the invoice so deductible elements can be evidenced.
- Under CIF, verify the insured amount is at least 110% of the invoice value if a letter of credit is involved (UCP 600 Article 28(f)).
- For containerised cargo, prefer CIP over CIF and FCA over FOB, per ICC guidance.
- Price the result with the landed cost calculator and verify the tariff line in the US HTS finder or EU TARIC lookup.
Last reviewed against Incoterms 2020 (ICC 723E) and the WTO Valuation Agreement, September 2026. Educational reference, not customs advice; confirm the tariff line and valuation treatment with a licensed broker before commercial reliance.
Frequently asked questions
Who pays import duty under FOB?#
The buyer pays import duty under FOB. The seller's obligation ends once the goods are on board the vessel at the named port of shipment, and the buyer is the importer of record who clears customs and pays duty and import VAT or GST.
Who pays import duty under CIF?#
The buyer also pays import duty under CIF. The seller pays freight and cargo insurance to the named destination port, but import clearance, duty and import VAT or GST remain the buyer's obligation under Incoterms 2020 rule B7.
Does CIF increase the amount of duty payable?#
It can. In countries that assess duty on CIF value (the EU, UK, India, China, Brazil and most GCC states), freight and insurance form part of the dutiable value, so the same cargo sold CIF produces a higher customs value and a higher duty and VAT amount than the FOB price alone. The United States appraises on transaction value on an FOB basis and excludes international freight and insurance, so the CIF/FOB choice does not change the US duty base, although it changes the invoice total.
Which Incoterm makes the seller pay import duty?#
Only DDP (Delivered Duty Paid). Under DDP the seller clears the goods for import and pays duty and import taxes. Under DAP and DPU the seller delivers to the destination but the buyer still clears import and pays duty.
Can the buyer deduct freight from the customs value on a CIF invoice?#
Only where national law allows it. In the United States, international freight and insurance are not part of the appraised value and are deducted or excluded when properly itemised. In CIF-valuation jurisdictions they are additions under GATT Article VII implementing rules and cannot be deducted, though inland transport after the frontier can usually be excluded when shown separately on the invoice.