FOB to CIF Converter: Compute Customs Value Correctly in 2026

The conversion from FOB invoice value to CIF customs value is one of the most common arithmetic operations in international trade. Most importers do it daily. Many do it wrong. The right computation puts the freight, the insurance, and the right combination of cargo terms on the right side of the customs value, and gets the entry duty correct.

This guide covers the FOB and CIF definitions, the customs valuation method by destination country, the conversion math with worked examples, and the most common errors that produce 1592 exposure.

FOB and CIF in two sentences each

FOB (Free on Board): the seller delivers goods on board the vessel at the named port of shipment. The buyer pays international freight, insurance, and all downstream costs. Risk transfers when the goods cross the ship's rail at the load port.

CIF (Cost, Insurance, and Freight): the seller pays the cost of the goods plus marine insurance and international freight to the named port of destination. Risk transfers at the load port (same as FOB), but cost coverage extends to the discharge port. The buyer pays import duty, taxes, and inland transport from the discharge port.

For air freight, the equivalent terms are FCA (Free Carrier) and CIP (Carriage and Insurance Paid). For purposes of customs valuation, the math is similar: international leg cost is included, destination handling is not.

Customs valuation by destination

The US is the unusual destination among the major economies because US Customs valuation excludes international freight and insurance from the duty base. Most other destinations include them.

The practical effect: a 100,000 USD FOB invoice with 5,000 USD freight and 1,200 USD insurance produces a US customs value of 100,000 USD, but an EU or UK or India customs value of 106,200 USD. The duty base differs by 6.2 percent.

The FOB to CIF math

Standard formula:

CIF = FOB + International Freight + Marine Insurance

Where:

• FOB: the seller's invoice price at the load port.
• International Freight: port-to-port shipping cost. Excludes destination port handling and inland transport from the destination port.
• Marine Insurance: typically 0.5 percent to 2 percent of (FOB + Freight) times 1.1 (the 1.1 factor covers the warehouse-to-warehouse extended ICC Clauses C scope).

The 1.1 factor is convention. The insurance contract pays out on goods value at point of loss. To indemnify the buyer for the full landed cost (not just the FOB price), insurance is written at 110 percent of (FOB + Freight). This is the world standard since Lloyd's Marine Insurance forms.

Worked example: 100,000 USD FOB shipment from Shanghai to Hamburg

Suppose the seller invoices 100,000 USD FOB Shanghai. Port-to-port freight Shanghai to Hamburg via 40-foot container is 2,400 USD. Insurance rate is 0.7 percent.

The EU customs value is 103,189 USD. EU MFN duty applied at this base, not at the 100,000 FOB.

Worked example: same shipment landed in the US

For US Customs the valuation excludes the international freight and insurance:

Duty is applied to 100,000, not 103,189. The freight and insurance are still real costs to the importer but are not in the duty base.

Note: the US later adds Merchandise Processing Fee (MPF) and Harbor Maintenance Fee (HMF) on a separate base that is essentially the same FOB-equivalent transaction value. These are fees, not duties; the methodology is harmonized within the US system.

Worked example: same shipment landed in India

For Indian customs:

The 1 percent landing charge is an additional standard mark-up applied by Indian customs to estimate inland handling. Indian Basic Customs Duty (BCD), Social Welfare Surcharge, IGST, and other Indian duty layers all apply on this Assessable Value of 104,221 USD.

The Indian methodology produces a duty base 4.2 percent higher than the original FOB. Indian importers should always model in this uplift when comparing landed costs across destinations.

Worked example: same shipment landed in Australia

Australian customs uses the FOB equivalent. The methodology computes the value by starting from the contract price and deducting international freight, insurance, and any other costs incurred after the goods left the country of export:

Australia ends at the same 100,000 USD base as the US, just arrived at differently. Australian GST (10 percent) is then applied to the FOB plus duty plus international freight plus insurance amount, so the GST base does include the international leg even though the duty base does not. The Australian methodology has the unusual feature that duty and GST are computed on different bases.

Common errors that produce 1592 exposure

1. Using FOB at the load port as the EU customs value. Under-declares by the freight and insurance. CBP-equivalent (DG Taxud) catches at audit. Penalty under EU Union Customs Code Article 42 can be significant; under member-state law penalties can range to 200 percent of duty loss.

2. Including destination port handling in the CIF value. Over-declares. The importer pays duty on uplifted base. No legal jeopardy but loses real money.

3. Treating CIP (with full insurance to Lloyd's Clauses A) as identical to CIF (with minimum Clauses C insurance). The insurance premium differs materially. CIF only requires minimum cover. CIP requires comprehensive cover. The Incoterms 2020 revision tightened the distinction.

4. Including the seller's domestic transport in the FOB value. Pre-FOB costs (inland freight from factory to load port) are inside FOB. Post-FOB costs (international freight, marine insurance) are outside FOB. Mixing these inflates or deflates the FOB.

5. Using a freight estimate that does not match actual paid freight. US Customs ties the freight figure to documentary evidence (bill of lading and freight invoice). EU customs is similar. Estimated freight without supporting invoice does not survive audit.

Insurance rate ranges

Typical 2026 marine insurance rates:

Importers self-arranging insurance often get rates 30 to 50 percent below the rates implied in CIF invoices, where the seller marks up insurance as part of the bundle.

Run your FOB to CIF conversion now

The LandedFees calculator handles FOB to CIF conversion for any destination, applies the correct customs valuation methodology, and produces the duty calculation on the right base. Useful for sourcing comparisons across destinations and for negotiating Incoterm changes with suppliers.

Convert FOB to CIF and calculate duty

Citations

• WTO Customs Valuation Agreement: https://www.wto.org/english/tratop_e/cusval_e/cusval_e.htm
• US 19 USC 1401a (US customs valuation): https://www.law.cornell.edu/uscode/text/19/1401a
• EU Union Customs Code Article 70 (transaction value): EUR-Lex Regulation (EU) 952/2013
• Indian Customs Valuation Rules 2007: https://www.cbic.gov.in/htdocs-cbec/customs/cs-act/cvr_rules2007.pdf
• Incoterms 2020 ICC publication: https://iccwbo.org/business-solutions/incoterms-rules/