How to calculate landed cost

What landed cost means

Landed cost is the total cost of getting a product from your supplier to your warehouse or customer — everything, not just the unit price. It's the number you should base your selling price on, because anything you leave out comes straight off your margin.

The formula is simply:

Landed cost = product cost + freight + insurance + customs duty & taxes + clearance & handling fees + last-mile delivery

Where the supplier's responsibility ends and yours begins is set by your Incoterm — so always read landed cost alongside the term you've agreed. See our Incoterms 2020 guide for who pays what.

The cost components, one by one

• Product cost — the ex-works or FOB price, plus any export packing.
• Freight — the main international carriage, air or ocean, plus origin charges (see what it costs to ship a container).
• Insurance — cargo cover for the journey; carrier liability alone won't make you whole (see our Risk & Cargo Insurance page).
• Customs duty & import taxes — duty is a percentage of the customs value set by your HS code; VAT or sales tax may apply on top. Our Import Tax & Duties page breaks this down.
• Clearance & handling — brokerage, terminal handling, security filings and documentation.
• Last-mile delivery — trucking from the port or airport to your final address.

A worked example

Say you import 1,000 phone cases from a supplier at $2.00 each — a $2,000 product cost.

• Ocean freight and origin charges: $600
• Cargo insurance: $40
• Customs duty at, say, 6.5% on a $2,640 customs value: ≈ $172
• Customs clearance & brokerage: $150
• Last-mile delivery: $120

Total landed cost ≈ $3,082, or about $3.08 per unit — 54% above the supplier's $2.00 price. Price your retail margin off $3.08, not $2.00, and the difference between profit and loss becomes obvious.

The costs people forget

Margins usually leak through the small, easy-to-miss lines: demurrage and detention if a container clears slowly, currency movement between order and payment, bank and payment fees, return-handling, and the per-shipment customs cost that now applies to even small US parcels since the end of de minimis. Build a buffer for these rather than discovering them on the invoice.

How Baobab quotes landed, not partial

We quote on a fully landed basis from the start — freight, duty, clearance and delivery in one number — so there are no surprises after the goods sail. Send us your product value, HS code (or a description), dimensions and destination, and we'll return an itemised landed cost, usually within four hours.