# Landed cost: formula and worked example

Landed cost is the <b>total cost of getting a product to your door</b>: 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.

## Key takeaways

- Landed cost = product + freight + insurance + duties and taxes + fees + local delivery.
- The Incoterm sets which of these are already in the supplier's price.
- Duty is usually charged on the customs value, which some countries calculate on CIF, others on FOB.
- Divide by units to price per item and compare suppliers fairly.

## 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](https://cartonmath.com/cbm-calculator/) gives the cubic metres and the [container calculator](https://cartonmath.com/container-loading-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 volume](https://cartonmath.com/cbm-calculator/): CBM, container share and chargeable weight.

## Sources

- [International Chamber of Commerce: Incoterms® rules](https://iccwbo.org/business-solutions/incoterms-rules/)
- [U.S. Customs and Border Protection: Basic import and export](https://www.cbp.gov/trade/basic-import-export)

## FAQ

**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.

Source page: https://cartonmath.com/guides/landed-cost/
Updated: 2026-10-06
Publisher: CartonMath (https://cartonmath.com)