Landed cost
How to calculate landed cost, with a worked example
Landed cost is what an import really costs you once it reaches your warehouse. The supplier invoice is only the start. Freight, insurance, customs duty, port charges, the clearing agent and the truck to your door all belong in the number. Leave them out and every margin you quote is a guess.
The formula
Start with the customs value: goods plus freight plus insurance. Most countries charge duty on that figure, usually called the CIF value. Customs duty is the customs value multiplied by the duty rate for your HS code.
Import VAT or sales tax is usually charged on the customs value plus duty. Count it as cost only if your business cannot reclaim it. If you are registered and recover it, it is a cash-flow cost, not a product cost.
Landed cost is the customs value, plus duty, plus port and handling, the clearing agent's fee, inland transport and any other charges, plus import tax only when you cannot reclaim it. Divide by the number of units to get the cost per unit.
A worked example
Say you import 1,000 units. The supplier charges 10,000. Freight is 1,500 and insurance is 100, so the customs value is 11,600. At a 10% duty rate, duty is 1,160. Port and handling cost 400, the clearing agent charges 250 and inland transport is 300.
Landed cost is 11,600 plus 1,160 plus 400 plus 250 plus 300, which is 13,710. That is 13.71 per unit, not the 10.00 on the invoice. Price from the invoice and you lose more than a third of the margin you thought you had.
Where it goes wrong
The numbers arrive at different times. The invoice comes first, freight a week later, duty at clearance and the transport bill after delivery. If each one lives in a different email or spreadsheet, the landed cost is only right once someone pastes it all together, usually at month end and after the goods are sold.
Rules also differ by country. Some value goods differently or add other fees, so confirm the details with your customs broker.
Try it on your own numbers
You can work out any shipment with the free landed cost calculator. No sign-up needed.
In Customer Flow, landed cost builds up on the shipment file itself. Each charge is added as it arrives, so the cost per unit is current while the goods are still moving.