Ad valorem based on CIF (cost, insurance, and freight)
Ad valorem based on FOB (free on board)
Weight
No Duties Assessed (free port)
Here is an example of the 4 methods
Note: This simplified example only covers duty rates. There are usually other fees that go into a landed cost calculation, including tax, carrier fees, and other governmental fees.
Assumptions:
- Item Cost: 100 USD
- Weight: 5 KG
- Shipping: 25 USD
| Calculation Method↕ | Duty Formula↕ | Equation and result↕ |
|---|---|---|
| Ad valorem 10% CIF | duty rate * (item cost + shipping cost) | 10% * (100 USD + 25 USD)= 12.50 USD |
| Ad valorem 10% FOB | duty rate * item cost | 10% * 100 USD = 10 USD |
| Weight-based 5 USD per kg | duty rate * weight | 5 USD * 5 KG = 25 USD |
| Free 0 | no duties calculated or applied | 0 |
Calculation method by country
Now that you have a basic understanding of the duty calculation methods and what they entail, let’s break down the methods by country.
Customs duty calculation methods
Explore the different ways duty is calculated.If you have ever sent or received goods to or from another country, you’re likely familiar with paying import duty. But have you noticed that the duties that you pay are different depending on what and where you’re importing/exporting? That’s because different countries have different duty rates based on the type of products being imported, the Harmonized System (HS) code, and other factors. The ways different countries assess duty are called calculation methods.
Ad valorem: Duty charged as a percentage of the value of the goods.
There are four ways in which countries calculate duties: