Landed cost: what an imported product really costs per unit

What goes into landed cost

Landed cost starts with the price on the factory's quote and adds every cost between the factory and your shelf. How many of those costs you add yourself depends on the shipping terms of the quote.

Three lines on that table catch first-time importers out.

International freight is part of landed cost but not of the duty base. US customs value is built on the transaction value, which excludes C.I.F. charges^[1]. You pay for the ocean freight and insurance, but duty is not charged on them, provided they can be separated from the price. The trucking to the origin port is treated differently. On an ex-factory price, that inland freight and the related charges will not be added to the price^[1]. When the price includes it, as an FOB price does, the charge generally will be part of the transaction value to the extent included in the price^[1]. So an EXW quote can carry a little less duty than an FOB quote for the same goods, even though you pay that trucking either way.

Some fees follow value, not weight. Cargo unloaded from a commercial vessel at a US port covered by the fee pays a harbor maintenance fee of 0.125% of the cargo's value^[2]. Duty and this fee rise with what the goods are worth, while freight rises with how much space they take up. The two need different ways of sharing them out, which the example below shows.

The bond is a premium, not the bond amount. An importer's continuous customs bond must be for at least $50,000 or 10% of the total estimated duties, taxes and fees in the previous 12 months, whichever is greater^[3]. You do not pay that amount; you pay a surety a premium to issue the bond, and that premium, spread across the year's shipments, is the landed cost line.

The formula

• Landed cost = goods + origin charges + main freight and insurance + import duty + entry fees + broker and bond + destination charges
• Landed cost per unit = landed cost ÷ units received in sellable condition

Divide by the units you received and can sell, not the units you ordered. Short shipments and rejected units raise the real cost of the good ones. Add the bank transfer fees and currency conversion costs on the deposit and the balance payment as well; they are part of what the goods cost you.

Decide where your landed cost stops, and keep it there. If you sell through a fulfillment center, prep and the inbound shipment from your warehouse to that center are real costs per unit; either add them as a final line or track them separately, but do it the same way for every product so the numbers compare.

The Incoterms rule on the quote tells you which lines are already inside the seller's price. An EXW price leaves out every line after the factory door. An FOB price covers the goods loaded at the origin port, so you add main freight onward. A DDP price includes duty and delivery, so your job is to check what it assumes rather than add to it. To see how the duty line itself is worked out, and how the total changes by country of origin, use the step-by-step import duty and landed cost guide.

Splitting shared costs across products

One shipment often carries several products, and a single freight bill and a single entry cover all of them. Share each cost by what drives it:

• Freight and destination trucking by volume or weight, whichever the carrier bills on
• Duty line by line, since each product has its own rate
• Value-based fees and broker charges by each product's share of the shipment value

Splitting everything by unit count is the common shortcut, and it makes bulky products look cheaper than they are.

Example: two products in one shipment

A brand orders two products from one factory, quoted FOB at the origin port and shipped together to one US warehouse.

• 2,000 steel water bottles at $3.20 = $6,400, taking up 4 cubic meters
• 1,000 insulated lunch bags at $2.60 = $2,600, taking up 6 cubic meters

Shared costs: $1,500 for ocean freight and insurance and $500 for trucking to the warehouse, both split by volume, so the bottles carry 4 of the 10 cubic meters. $600 for the customs broker, bond, processing fee and port charges, split by value.

Landed cost per unit for two products that share one shipment

Line	Water bottles	Lunch bags
Goods (FOB)	$6,400.00	$2,600.00
Ocean freight and insurance, by volume	$600.00	$900.00
Duty, all layers combined	$960.00 at 15% (assumed)	$520.00 at 20% (assumed)
Harbor maintenance fee at 0.125% of the cargo's value[2]	$8.00	$3.25
Broker, bond, processing fee and port charges, by value	$426.67	$173.33
Trucking to the warehouse, by volume	$200.00	$300.00
Landed cost	$8,594.67	$4,496.58
Landed cost per unit	$4.30	$4.50

The lunch bag's factory price is $0.60 lower, but it lands $0.20 higher, because it takes up more space per unit and carries a higher duty rate. Split the freight and trucking evenly per unit instead and each product carries about $0.67 of it: the bottles look $0.27 dearer than they are and the bags $0.53 cheaper.

Illustrative figures, not a quote. Real prices depend on the spec, quantity and factory.

Get the split right before you set a retail price or compare two factories.

Landed cost on your books

US tax rules build the cost of bought inventory the same way. The federal income tax regulations define the cost of purchased merchandise as the net invoice price, to which should be added transportation or other necessary charges incurred in acquiring possession of the goods^[4]. So freight and duty paid to bring the goods in generally sit in inventory with them and reach your cost of goods sold when the units sell, not when you pay the bills. Ask your accountant how this applies to your business.

When you buy from an overseas manufacturer on FOB or FCA terms, you are normally the importer of record: the duty, fees and your own broker's charges are yours to pay at entry and sit outside the manufacturer's unit price. Ask each manufacturer to state its shipping terms on the quote, so you can see which lines of the formula are already inside the price.