The landed cost formula
Landed cost = product cost
+ freight
+ insurance
+ customs duty
+ import taxes you cannot reclaim
+ customs brokerage
+ port, terminal and handling fees
+ local delivery
+ other costs (inspection, packaging, bank fees)
Landed cost per unit = landed cost ÷ units received
The goal is to know what each unit really costs once it is in your warehouse, so you can price it and compare suppliers and shipping options fairly.
The cost components
- Product cost: the supplier invoice value, converted to your currency.
- Freight: sea, air or road charges, including origin charges under your Incoterm.
- Insurance: cargo insurance, often a percentage of the insured value.
- Duty: a percentage of the customs value. Many countries use the CIF value (cost, insurance and freight); others use FOB. The rate depends on the product's tariff code.
- VAT, GST or sales tax: usually charged on the customs value plus duty. If your business can reclaim it, it is a cash-flow cost rather than part of the product's cost.
- Brokerage: the customs broker's fee for the import declaration.
- Port and handling fees: terminal handling, CFS charges for LCL, documentation fees.
- Local delivery: trucking from the port or airport to your door.
Worked example
An import of 500 units at 12.00 each, CIF duty base, 8% duty and 20% VAT that cannot be reclaimed:
Product cost 6,000.00 Freight 900.00 Insurance 30.00 CIF value 6,930.00 Duty 8% × 6,930.00 554.40 VAT 20% × 7,484.40 1,496.88 Brokerage 120.00 Port and handling 180.00 Local delivery 150.00 Landed cost 9,431.28 Per unit (÷ 500) 18.86
If the VAT can be reclaimed, the landed cost is 7,934.40, or 15.87 per unit.
Splitting costs between SKUs
When a shipment holds several products, shared costs need to be allocated. Common bases:
| Basis | Fair when |
|---|---|
| Quantity | Units are similar in size and value |
| Product value | Costs follow value, such as insurance and duty |
| Weight | Freight is charged on weight, as with dense cargo or air freight |
| Volume (CBM) | Freight is charged on space, as with LCL or a full container of light goods |
Allocating freight by value can make cheap, bulky products look more profitable than they are, so choose the basis that matches what drives each cost.
Calculate it for your shipment
The Landed Cost Calculator takes per-SKU product costs and every shipment cost, applies duty and tax on the base you choose, and allocates the shared costs by quantity, value, weight or CBM. For a quick per-unit view of logistics costs alone, use the Shipping Cost per Unit Calculator. Delays at the port can add demurrage and detention; see Demurrage vs Detention.
Duty and tax results depend on the rates and calculation bases entered and do not constitute customs advice.