Customs value basics: what CIF and FOB change

The customs value of imported goods is normally their transaction value: the price actually paid or payable for them when sold for export to the EU, adjusted where necessary [1]. The adjustment that the delivery terms decide is transport. The cost of transport and insurance, and the loading and handling charges, up to the place where the goods are brought into the EU are part of the customs value [1]. Under FOB, the main freight and its insurance are not in the price, so they are added. Under CIF to the EU port where the goods first arrive, they already are, and the price stands [3]. Transport after the goods have entered the EU is not part of the customs value [1].

Start from the transaction value

Article 70 of the Union Customs Code makes the transaction value the primary basis of the customs value. It is the total the buyer pays, or will pay, to the seller or to a third party for the seller's benefit, and it applies only when four conditions hold: no restrictions on the buyer's use of the goods beyond the permitted ones, no condition whose value cannot be determined, no part of later resale proceeds going back to the seller unless it can be added, and buyer and seller not related, or related without it influencing the price [1].

Article 71 then lists what is added to the price when it is not already in it: commissions other than buying commissions, packing, certain goods and services the buyer supplied, royalties that are a condition of sale, proceeds going to the seller, and the transport costs this guide is about [1]. Additions are made only on the basis of objective and quantifiable data [1].

Freight and insurance to the border

The line is drawn at the place where the goods are brought into the customs territory of the Union [1]. The Implementing Regulation fixes that place by mode of transport [2]:

• Sea: the port where the goods arrive first in the EU.
• Sea, then inland waterway without transhipment: the first port where they can be unloaded.
• Rail, inland waterway or road: the place of the customs office of entry.
• Other modes, such as air: the place where the frontier of the EU customs territory is crossed.

For air freight, the part of the cost to include is a percentage per country or airport of departure, set in Annex 23-01 of the Implementing Regulation [2] [4]. Where transport is free of charge or provided by the buyer, the transport cost to include is calculated from the freight rates normally applied for the same mode [2]. Dutch customs puts the difference with insurance plainly: freight always belongs in the customs value, even when the transport cost nothing, while insurance is included only if the goods were actually insured for the transport [5].

What each Incoterm changes

German customs publishes a table of what the Incoterms 2020 mean for the place of introduction [3]:

The table concerns transport costs. Insurance to the place of introduction that is not in the price is added as well, if the goods were insured for the transport [1] [5].

A deduction is not automatic. The declarant has to claim it and prove the amount, and the transport cost has to be distinguishable from the price of the goods, for example on a separate freight invoice; if it cannot be told apart, it stays in the transaction value [3]. Import duties and other charges payable in the EU by reason of the import are never part of the customs value [1].

A worked example

The same goods, bought four ways, arriving by sea at Rotterdam. The figures are an illustration, not a real shipment.

The customs value is then converted into euro. In a euro-area member state, the rate is the one the European Central Bank publishes on the second last Wednesday of the month, and it applies for the whole of the following month [2].

Why the difference is worth the check

Duty rates given as percentages are ad valorem duties, assessed on the customs value [6]. A missing freight cost under FOB, or a deduction taken without a separate freight invoice under DAP, changes the base of every percentage applied to the goods. The delivery terms and the freight invoice are therefore part of the value file, not background.

For a specific case, the customs office in Germany or the Netherlands is the authority on how it values the goods.

Athren prepares the case from the shipment email; your declarant checks what is open and files it. Athren files nothing.