What Is Landed Cost?
Landed cost is the total price of a product once it has arrived at your warehouse door — including the product price, shipping, customs duties, taxes, insurance, and all handling fees. It's the number that determines your actual margin.
The formula:
Most ecommerce sellers focus only on product cost and shipping, ignoring duties, broker fees, and handling charges that can add 15-45% to the total landed cost.
The Landed Cost Formula: Component by Component
| Component | Typical Range | What It Covers |
|---|---|---|
| Product Cost (FOB) | Base price | Factory gate price, including packaging and labeling |
| International Freight | $2-$8/kg (air), $1K-$5K/container (sea) | Shipping from origin to destination port |
| Customs Duties | 0-25%+ of CIF value | Import duties based on HS code and country of origin |
| Import VAT/GST | 5-27% (varies by country) | Consumption tax applied at import |
| Cargo Insurance | 0.3-0.5% of CIF value | Coverage for loss or damage during transit |
| Customs Brokerage | $50-$200 per entry | Broker fee for customs clearance paperwork |
| Port Handling / THC | $200-$800 per container | Terminal handling charges at destination port |
| Inland Freight | $300-$1,500 | Trucking from port to your warehouse |
| Merchandise Processing Fee | 0.3464% of value (US) | CBP processing fee, min $31.67, max $614.35 |
| Harbor Maintenance Fee | 0.125% of value (US, ocean only) | US port infrastructure fee |
Real-World Landed Cost Example
Let's calculate the true landed cost for importing 1,000 yoga mats from China to a US warehouse:
| Component | Calculation | Cost |
|---|---|---|
| Product Cost (FOB Shanghai) | 1,000 units × $8.00 | $8,000 |
| Ocean Freight (LCL) | 5 CBM × $120/CBM | $600 |
| Cargo Insurance | 0.5% × ($8,000 + $600) | $43 |
| CIF Value | $8,000 + $600 + $43 | $8,643 |
| Customs Duty (HTS 9506.91 — 4.9%) | 4.9% × $8,643 | $424 |
| Merchandise Processing Fee | 0.3464% × $8,643 | $31.67 (min) |
| Harbor Maintenance Fee | 0.125% × $8,643 | $10.80 |
| Customs Brokerage | Flat fee | $125 |
| Port Handling (THC) | LCL destuffing | $200 |
| Inland Freight (LA → warehouse) | LTL trucking | $350 |
| Total Landed Cost | $9,785 | |
| Per Unit Landed Cost | $9,785 ÷ 1,000 | $9.79 |
The product cost was $8.00, but the true landed cost is $9.79 — a 22.4% increase. If you priced your product based on the $8.00 cost, you're losing $1.79 per unit in hidden costs.
Incoterms and How They Affect Landed Cost
Incoterms (International Commercial Terms) define who pays for what during international shipment:
| Incoterm | Seller Pays | Buyer Pays | Best For |
|---|---|---|---|
| EXW (Ex Works) | Nothing (product at factory) | Everything: freight, customs, insurance | Experienced importers with own logistics |
| FOB (Free On Board) | Cost to load on ship | Freight, insurance, customs, delivery | Most common for ecommerce importers |
| CIF (Cost, Insurance, Freight) | Product + shipping + insurance to port | Customs, delivery to warehouse | Beginners who want simplicity |
| DDP (Delivered Duty Paid) | Everything including customs | Nothing — product arrives at your door | Turnkey solution, highest per-unit cost |
Frequently Asked Questions
What is landed cost in simple terms?
Landed cost is the total cost of a product from factory door to your warehouse door. It includes the product price, international shipping, customs duties, taxes, insurance, broker fees, port handling, and inland trucking. It's typically 15-45% higher than the product price alone, depending on the duty rate and shipping method.
How do I calculate landed cost per unit?
Add up all costs: product cost + freight + duties + taxes + insurance + brokerage + handling + inland transport. Divide the total by the number of units in the shipment. For example, if your total shipment cost is $9,785 for 1,000 units, your landed cost per unit is $9.79.
What is the CIF value for customs?
CIF (Cost, Insurance, Freight) value is the product cost + international freight + cargo insurance. This is the value on which customs duties are calculated in most countries. In the US, duties are calculated on FOB value (without insurance and freight), which is slightly different from the CIF standard used in the EU and other regions.
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