Chapter 4 · Lesson 255 min read

CIF and FOB values, unit price and quantity

Why imports are valued CIF and exports FOB, how to work out a unit price, and how to compare prices fairly across shipments and units.

हिन्दी में पढ़ें
Two price tags on a balance, one with a ship and insurance shield, beside a stack of boxes.

Why imports are CIF and exports FOB

Each country values goods at its own border. Under Section 14 of the Customs Act, the value of goods imported into India includes the cost of transport to the place of importation, insurance, and loading, unloading and handling charges, as the valuation rules set out. That is the CIF idea: cost, insurance and freight up to India. Customs charges duty on this assessable value.

Export goods are valued for delivery at the time and place of exportation. That is the FOB idea: the goods on board at the Indian port, with no freight or insurance onward. India's official trade statistics follow the same split: DGCI&S values imports CIF and exports FOB.

So one shipment has two values. India's export figures show it FOB. The buyer's country records it as an import, often including freight and insurance, so its figure is higher.

Working out a unit price

A unit price is the value divided by the quantity. It turns a record into a number you can compare: dollars per piece, per kilogram or per metre.

  1. Take the value and the quantity from the same record, and note the unit.
  2. Divide the value by the quantity.
  3. Write the answer with its unit and its basis, for example 'US$3.00 per piece, FOB'.
  4. Repeat for many records over several months, and compare like with like.
Example: one shipment, two values (made-up numbers)
  • An Indian exporter ships 2,000 cotton T-shirts. The shipping bill value is US$6,000 FOB.
  • FOB unit price: 6,000 ÷ 2,000 = US$3.00 per piece.
  • Freight to the buyer's port is US$500 and insurance US$100, so the CIF value is 6,000 + 500 + 100 = US$6,600.
  • CIF unit price: 6,600 ÷ 2,000 = US$3.30 per piece.
  • The T-shirts did not get dearer. The buyer's import value simply includes the cost of getting them there.

Comparing shipments with different units

Records under one code often use different units. Put them in one unit before you compare, using a conversion you can explain, such as the weight of one piece.

Example: pieces against kilograms (made-up numbers)
  • Record A: 1,000 pieces for US$4,000, so 4,000 ÷ 1,000 = US$4.00 per piece.
  • Record B: 300 kg for US$6,000, so 6,000 ÷ 300 = US$20.00 per kg.
  • If one piece weighs 0.25 kg, a kilogram is 4 pieces, so Record B works out at 20.00 ÷ 4 = US$5.00 per piece.
  • Record B is US$1.00 dearer per piece: 1.00 ÷ 4.00 = 25% more than Record A.

Compare CIF with CIF and FOB with FOB as well. If one figure includes freight and the other does not, the gap may be freight, not price. Watch the currency too: customs converts the invoice to rupees at the customs exchange rate in force on the day the bill of entry or shipping bill is filed.

Outliers: the record that does not fit

Some records sit far from the rest. The cause is usually something other than price: a sample, a free replacement, a mixed lot, a different grade, or a quantity typed in the wrong unit.

Example: why the middle beats the average (made-up numbers)
  • Five unit prices for one code: US$2.90, 3.00, 3.10, 3.20 and 31.00 per piece.
  • Average: (2.90 + 3.00 + 3.10 + 3.20 + 31.00) ÷ 5 = 43.20 ÷ 5 = US$8.64.
  • Middle value (the median), with the prices in order: US$3.10.
  • One odd record pushed the average to almost three times the usual price. The median shows the real level.

Watch out: Do not delete an outlier just because it is inconvenient, and do not let it set your price either. Open it, read the description and the unit, and work out why it differs. If you cannot tell, leave it out of your price and say that you did.

Using our trade figures

Our India's import and export figures show, for an 8-digit code, the average price per unit over the last 12 months: value divided by quantity, month by month and by country, in US dollars. Those averages mix grades and sizes, so they show the price level, not a quote. Use them to check whether a price you are offered is in the normal range.

In short

  • Indian customs values imports including freight and insurance to India (CIF), and exports at the Indian port (FOB).
  • The same shipment shows a higher value in the buyer's import records than in India's export records.
  • Unit price is value divided by quantity: always write the unit and the basis.
  • Convert to one unit, one basis and one currency before you compare.
  • Use the median of many records, and look into outliers before using them.

Try it on our data

Check yourself

Check yourself 1

1.An Indian export record shows US$6,000 FOB for 2,000 pieces. The buyer's country records US$6,600 for the same goods. Why?

Check yourself 2

2.Record A is US$4.00 per piece. Record B is US$20.00 per kg, and one piece weighs 0.25 kg. Which is dearer per piece?

Check yourself 3

3.Five unit prices are US$2.90, 3.00, 3.10, 3.20 and 31.00. Which figure best shows the usual price?

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Sources

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Trade Academy is education, not legal, tax or customs advice. Rules and rates change by notification: check the live source, or ask a licensed customs broker, before you act.