Landed cost: formula and worked example
Landed cost is the total cost of getting a product to your door: purchase price + freight + insurance + customs duties + import fees + local delivery. For example, goods bought for $10,000 FOB that cost $12,930 once shipped, insured, cleared and delivered have a landed cost of $12,930, or $6.46 per unit for 2,000 units.
The landed cost formula
Landed cost = product cost + freight + insurance + duties + taxes + customs and broker fees + destination charges and delivery
Recoverable taxes such as VAT or GST are often left out if your business reclaims them; include them if you cannot.
Worked example
2,000 units bought FOB Ningbo for $10,000, shipped by sea to the US. Duty rate 5 % (illustrative; yours depends on the HS code and origin).
| Cost | Working | Amount (USD) |
|---|---|---|
| Goods, FOB Ningbo | Supplier invoice | 10,000 |
| Ocean freight | Forwarder quote | 1,800 |
| Cargo insurance | About 0.5 % of value | 60 |
| Customs duty | 5 % × $10,000 customs value | 500 |
| Customs broker and filing fees | Broker invoice | 150 |
| Destination charges and delivery | Port, terminal, trucking | 420 |
| Landed cost | Sum | 12,930 |
| Per unit | 12,930 ÷ 2,000 | 6.46 |
The landed cost is 29 % above the FOB price. That uplift varies widely with the product's value per CBM: cheap, bulky goods carry a far higher share of freight.
How customs value is calculated
The US values imports on the transaction value, generally excluding international freight and insurance (close to FOB). The EU, UK, China and many others use a CIF-based value that includes them, so the same duty rate produces a higher bill. US formal entries also pay a merchandise processing fee and, for ocean shipments, a harbor maintenance fee, each a small percentage of value.
How the Incoterm changes the sum
| Supplier quotes | Already included | You still add |
|---|---|---|
| EXW | Goods only | Export clearance, origin trucking, freight, insurance, duties, fees, delivery |
| FOB | Goods, export clearance, delivery on board | Freight, insurance, duties, fees, delivery |
| CIF | Plus freight and minimum insurance | Destination charges, duties, fees, delivery |
| DAP | Delivered to your door | Duties, taxes and clearance |
| DDP | Everything, duties paid | Usually nothing, check local fees |
Freight per unit
Freight is charged by space or weight, so work it out per unit from the shipment volume: the CBM calculator gives the cubic metres and the container calculator how many units fit a container. A carton that holds one more unit per carton can lower landed cost more than a supplier discount.
Work out shipment volumeCBM, container share and chargeable weight.Sources
Tools used in this guide
Related guides
Common questions
What is landed cost?
The total cost of a product delivered to your premises: purchase price plus freight, insurance, duties, taxes, customs fees and delivery.
What is the landed cost formula?
Landed cost = product cost + shipping + insurance + duties and taxes + customs and broker fees + destination delivery. Divide by units for landed cost per unit.
Is landed cost the same as CIF?
No. CIF covers goods, freight and minimum insurance to the destination port. Landed cost adds duties, taxes, clearance and delivery.
Does landed cost include VAT?
Include import VAT or GST if your business cannot reclaim it; many VAT-registered businesses leave it out because they recover it.