How to calculate landed cost: formula and worked example
What landed cost includes, the formula, a worked example from factory price to warehouse, and five steps to compare suppliers by the cost that really reaches you.
Alper AzakoğluForeign trade consultant
3 min read
Updated:
What is landed cost?
Landed cost is the total cost of a product once it is in your warehouse: the price you pay the supplier plus transport, insurance, duties, taxes you cannot reclaim, and fees. Two quotes with different unit prices can end up at the same landed cost, or the cheaper one can end up more expensive.
The formula
Landed cost = goods + transport to your border + insurance + import duty and other import taxes you cannot reclaim + destination charges + customs broker + delivery to your warehouse.
Which of these you pay directly depends on the delivery term. Under FCA or FOB you pay the main freight; under CIF the seller pays it but its cost is in the price: Incoterms 2020 in one table.
A worked example
The figures below show the method only; all amounts are examples in US dollars, and the duty rate is not a real rate for any product.
| Item | USD |
|---|---|
| Goods (FCA factory, invoice value) | 20,000 |
| Inland transport to port and export handling | + 900 |
| Ocean freight | + 1,800 |
| Cargo insurance | + 60 |
| Value at your border (CIF) | 22,760 |
| Import duty (example rate 4% of CIF) | + 910 |
| Destination port and terminal charges | + 450 |
| Customs broker | + 200 |
| Inland delivery to your warehouse | + 600 |
| Landed cost before import VAT | 24,920 |
Watch out
The same product can face very different duties depending on its origin. A free trade agreement or the EU–Türkiye Customs Union can bring the duty to zero with the right certificate, while anti-dumping duties can make a low price expensive. Check origin rules before choosing a supplier.
Five steps to a reliable estimate
- Fix the HS code and origin. Every duty rate depends on them: what is an HS code.
- Bring all quotes to one delivery term. Ask suppliers for FCA or FOB at a named place so you compare like with like.
- Get current freight quotes. Ask what is included, especially terminal and destination charges: how ocean freight is charged.
- Check duty and taxes in your official tariff. Include anti-dumping or other measures where they apply.
- Add broker and inland costs. Then compare suppliers by landed cost per unit.
Find suppliers by landed cost, not unit price
We find suppliers in customs records, verify them and compare their offers by the cost of the goods arriving at your warehouse.
Frequently asked questions
Is import VAT part of landed cost?
If you can reclaim import VAT or GST, leave it out of cost and plan it as cash flow. If you cannot, include it.
Is duty always calculated on the CIF value?
No. Many countries, including the European Union, use a value that includes freight and insurance to their border; the United States generally uses the transaction value without international freight. Check your own country’s customs valuation rules.
How precise can a landed cost estimate be?
Freight and port charges change often. Use current quotes for each order and keep a margin for currency and freight changes.
Sources
- World Trade Organization, Customs Valuation Agreement: wto.org
- International Chamber of Commerce (ICC), Incoterms® 2020: iccwbo.org
Author
Alper Azakoğlu
For 30 years he has worked as foreign trade consultant and foreign trade manager for manufacturers in industrial zones across Türkiye. He writes these guides from his own work in the field.