What Is FOB? Why US Tariffs Don't Include Freight

Bottom line: FOB (Free On Board) = the price of goods before loading onto the ship, excluding international freight and insurance. US customs uses FOB as the tariff tax base, so the tax you pay is based on the goods' value before they reach the port — freight and insurance are not taxed.


What Exactly Is FOB?

FOB is an international trade term referring to all costs incurred by the seller before the goods are loaded onto the ship (or handed to the carrier): ex-factory price + local freight + packing + terminal charges. International freight and insurance incurred after loading are NOT part of FOB.

Correspondingly: - CIF = FOB + international freight + insurance (landed cost) - CFR = FOB + international freight


Why Does the US Use FOB While China/EU Use CIF?

Country/Region Tax base Meaning
United States FOB Excludes freight and insurance
China CIF Includes freight and insurance
European Union CIF Includes freight and insurance

This is an established rule in each country's customs law, not optional. So the same shipment is taxed on a different base in the US vs. China/EU.


What Does This Mean for Tax Calculation?

Assume FOB value of $10,000, international freight + insurance of $1,500:

If you mistakenly calculate US taxes using CIF, you're paying duties on the freight and insurance — paying extra for nothing.


MPF / HMF Are Also Based on FOB

Easily overlooked: MPF (0.3464%) and HMF (0.125%) are also calculated on FOB, not on the duty amount. So if you enter the wrong "value," the fees will also be wrong.


How to Fill in HSBot?

The "value" field in HSBot's tariff calculator = FOB = transaction price (excluding international freight and insurance). Enter the correct value so all layers and fees are calculated accurately. If you only have CIF, subtract freight and insurance to get FOB before entering.


Avoid Tax Base Errors with HSBot

HSBot explicitly uses FOB as the tax base. Enter your product and value to automatically stack all layers, without needing to manually distinguish between CIF/FOB conversion traps.