As of 7 November 2026, the answer depends on where the garments land: the US rule leaves international freight and insurance out of the dutiable value when they are shown separately, while the UK and Australia bring them into the base for import VAT or GST. With valid proof of Indian origin, UK and Australian duty on garments is 0%, so there the value base changes the tax, not the duty. If you import without that proof, check with your customs broker how freight and insurance are treated in the customs value.
Why the value base changes the duty
Duty is the rate multiplied by the customs value, so anything counted in that value is charged at the full rate. CIF (cost, insurance and freight) describes a price that includes international freight and insurance; FOB (free on board) describes a price that stops before them. These are sale terms. Each country’s valuation rule decides what customs actually counts.
The US regulation shows the difference. In one of its examples, a buyer pays $2,000, of which $150 is ocean freight and insurance. The $150 is excluded, even though the buyer paid it to the seller. The example’s final value is $2,200 because a $350 debt settled through the price counts as an indirect payment and is added. Put that $150 against a woven cotton dress at the 18.4% US total, and counting it would add $27.6 of duty. At a 0% rate, the same freight adds no duty at all.
What the official texts say, market by market
| Market | Duty on a woven cotton dress | International freight and insurance in the duty value | Import VAT or GST |
|---|---|---|---|
| United Kingdom | 12% standard; 0% with proof of Indian origin | Covered by separate HMRC guidance on delivery costs; check with your customs broker | 20% on the customs value, duty, and costs including transport and insurance to the first UK destination |
| Australia | 5% standard; 0% with proof of Indian origin | Not settled by the Australian GST page; check with your customs broker | 10% on the customs value, duty, and international transport and insurance not already in the customs value |
| United States | 8.4% standard plus 10% Section 301: 18.4% total | Excluded in the regulation’s example, where the charge is identified | None |
In the UK, the 0% rate under the UK–India CETA has applied since 15 July 2026, against a standard 12% (8% on woven scarves). The garment must originate in India and needs either an origin declaration by the exporter on the invoice or a certificate of origin issued in India.
In Australia, the ECTA 0% rate has applied since 29 December 2022, against a general 5%; scarves, shawls and some knitted lines are already Free for everyone. Australia requires a certificate of origin, except on consignments of AUD 1,000 or less.
The US has no trade agreement with India in force, so the value base matters on every shipment. A woven viscose or polyester dress pays 26% in total and a woven silk scarf 11.2%, each including the 10% Section 301 duty collected since 24 July 2026.
What else moves the value
Freight is not the only item. The US adds the following to the price paid, to the extent they are not already in it:
- packing costs incurred by the buyer;
- any selling commission incurred by the buyer;
- the apportioned value of any assist, such as materials the buyer supplies for incorporation in the garment, including their transport to the place of production;
- any royalty or licence fee the buyer must pay as a condition of the sale;
- resale proceeds that accrue to the seller.
Foreign inland freight has its own US test. It is not added to an ex-factory price. If the price includes it, it stays in the value unless it is identified separately and occurs after the goods have been sold for export and placed with a carrier for through shipment, shown by a through bill of lading.
In the UK, the VAT value must start from the customs value even when no duty is payable, so a 0% claim does not remove the calculation. HMRC adds commission, packing, transport and insurance to the first UK destination, plus costs such as customs clearance, handling and storage. Buying commission, royalties, licence fees and prompt-payment discounts still available at import stay out of the VAT value. HMRC’s methods for estimating these incidental expenses must not be used for the customs duty value. A VAT-registered importer using postponed VAT accounting pays nothing at the border and declares and reclaims the VAT on the same VAT Return, so the net cost is nil.
In Australia, international transport and insurance run from the place of export to the place of consignment in Australia. A GST-registered importer in the Deferred GST scheme, for monthly BAS lodgers, reports the GST on the next BAS and claims it back on the same BAS, though customs duty is still payable before release. Otherwise GST is paid at clearance and claimed as an input tax credit.
One practical step serves all three markets: ask for goods, freight and insurance as separate figures on the documents. The US inland freight test depends on that split, HMRC’s nationally agreed rates for incidental expenses need the freight to the UK border separately distinguished, and Australia adds transport and insurance only where they are not already in the customs value.
Check your own garment
We manufacture women’s dresses, kaftans, skirts and scarves in India and send the certificate of origin with the documents for every qualifying UK or Australian shipment, so Talk to us about the paperwork for your order.
Sources
- Working out the VAT value using the customs value
- GST and other taxes on imported goods
- 19 CFR 152.103 — transaction value
Indicative information from official sources, written 7 November 2026. Rates verified on against the official tariffs. It is not a customs ruling; confirm with your customs broker before you rely on it.
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