Incoterms and Customs Value: Why Freight Terms Change Your Duty

Incoterms are the International Chamber of Commerce rules that set who pays for freight, insurance and duty in a sale. They matter for customs because the U.S. charges duty on a value that excludes international freight and insurance. If your price includes those costs, as a CIF or DDP price does, they have to be taken out before the value is declared. If they are not, you pay duty on shipping.

How common terms translate

• EXW and FCA: The price is at or near the factory. Foreign inland freight to the port may need to be added.
• FOB: The price covers goods loaded at the foreign port. Usually close to the U.S. basis.
• CFR and CIF: The price includes ocean freight, and with CIF, insurance. Those amounts come out.
• DAP and DDP: The price includes delivery, and with DDP, U.S. duty. Freight, insurance and duty all come out.

What you need to deduct

Deductions must be supported by documents, such as freight invoices or a breakdown on the commercial invoice. Estimates without support are not accepted.

Where errors happen

• Declaring the full CIF price as value.
• Declaring a DDP price that includes the duty itself.
• Missing foreign inland freight on EXW purchases.

Frequently asked questions

Is the value on my invoice always the value I declare? Not always. See dutiable value.

Can I fix past overvaluation? Yes, by PSC before liquidation or by protest within 180 days after. See PSCs and protests.

How Caspian checks freight terms

Caspian compares entered values against Incoterms and freight records to find duty paid on shipping. See our trade audit.

Works Cited:

• International Chamber of Commerce: Incoterms rules
• 19 U.S.C. 1401a, Value