Landed cost is what one unit costs you standing in your own warehouse: the factory price plus everything that had to happen to get it there. This page gives the method, then runs it on a real shipment so you can see where the money actually goes.
Costing · 8 min read · reviewed 2026-10-01
Everything else in this article is a detail hanging off one sum:
Landed = FOB + freight + insurance + duty + fees + destination charges
Each term has a definition you cannot guess, and each one is where a different business gets it wrong. Freight is charged per container, not per unit, so it only becomes a per-unit number after you divide by the units that actually fit — which is a packing question, not a freight question. Insurance is charged on 110% of the CIF value, which is circular. Duty is charged on a customs value that some countries define as FOB and others as CIF. Fees can be percentage-based with a floor and a ceiling, so they are not a percentage at all.
Import VAT is deliberately last, and separate. It is a cash cost on the day of clearance and a recoverable cost a month later if you are registered in the destination country. Putting it in the landed cost without saying whether it comes back is the single most common way a costing sheet overstates margin by 20%.
A Chinese supplier quoting EXW is quoting a price for goods sitting on a loading dock that may be 900 km from any port. Between that dock and the ship there are four charges that nobody invoices separately until they happen: inland haulage to the port, export declaration, origin terminal handling, and loading.
FOB absorbs all four. That is why FOB is the default quotation in China export and why roughly three quarters of the quotes you will receive are already FOB — the number a forwarder can work with immediately, and the number that is comparable between two suppliers without a spreadsheet.
If you are handed an EXW price, add those four charges before doing anything else, or your landed cost will be short by the cost of getting the goods to the water. On a 40HQ from Ningbo to a factory in Yiwu that gap is a few hundred dollars; from an inland province it can be four figures.
Insurance at 110% of CIF. The premium is charged on a value that already includes the premium, so CIF is not FOB plus freight. The correction is small — a few tenths of a percent — and it is exactly the kind of small that nobody notices until it is multiplied by a year of shipments.
The US Merchandise Processing Fee. Charged at 0.3464% of the FOB value, with a floor and a ceiling. Below about $9,700 of value the floor governs and the effective rate is higher than the headline; above about $188,000 the ceiling does the same in reverse. A sheet that applies "0.3464%" as a straight percentage is wrong at both ends of the range.
The Harbour Maintenance Fee. 0.125% of FOB value, ocean cargo only. It disappears entirely if you ship air, which is why air and ocean quotes cannot be compared on freight alone.
Destination haulage to your own door. The port-to-warehouse leg is often quoted separately by a different company, weeks later, and is the reason a delivery that looked cheap in Shanghai looks expensive in Ohio.
5,000 units at $8.40 FOB — $42,000 of goods — in a 40ft high cube, ocean, destination Los Angeles, hauled to a warehouse in the Inland Empire. Duty is applied at the 3.3% reference rate for the HS chapter, on the FOB value, because the United States does not include international freight in the customs value:
| Line | Amount | Share | Per unit |
|---|---|---|---|
| Goods — FOB value | $42,000.00 | 86% | $8.40 |
| Main freight to US port | $3,850.00 | 7.9% | $0.77 |
| Marine / cargo insurance | $151.81 | 0.3% | $0.03 |
| Import duty | $1,386.00 | 2.8% | $0.28 |
| Merchandise Processing Fee | $145.49 | 0.3% | $0.03 |
| Harbour Maintenance Fee | $52.50 | 0.1% | $0.01 |
| Destination port, THC, brokerage & docs | $525.00 | 1.1% | $0.11 |
| Inland delivery to final destination | $780.00 | 1.6% | $0.16 |
| Landed cost | $48,891 | 100% | $9.78 |
The three observations that matter more than the total:
Freight is 8.2% of the landed cost and duty is 2.8%. On low-tariff consumer goods the sea leg is usually the bigger of the two, which means a freight negotiation moves the landed cost more than a customs classification argument does. It also means a packing change — a denser carton — is a duty-free way to cut cost.
The two customs fees add $145.49 and $52.50. Together they are under 0.5% of the invoice, and they are still real money: on this shipment they are worth about $145.49 of cash that a "duty only" model silently omits.
The $9.78 per-unit figure is the only number you can price from. Percentages above FOB are useful for comparing shipments; per-unit is what has to be smaller than your selling price.
Most sellers apply a rule of thumb — "add 30% for freight and duty" — and most rule-of-thumb percentages were calibrated on one product, one route, one year. The uplift here is 16%, and it would be a completely different number for the same shipment if the goods were bulky (freight share rises), heavily dutiable (duty share rises), or shipped air (freight rises, HMF disappears).
The correct order of operations is fixed: compute landed cost per unit first, then set the selling price from it. Setting a price from FOB and adding a margin that is "supposed to cover" freight and duty is how a product ends up selling at a gross margin of 40% and a net margin of 4%.
A useful check: your gross margin should be measured against landed cost, never against FOB. If your accounting says "cost" and means FOB, every product on the sheet looks more profitable than it is, and the error is proportional to how bulky or how dutiable the product is — so the products that are hardest to ship look the most attractive.
It is not a customs ruling. The duty rate used above is an HS-chapter reference rate and deliberately excludes anti-dumping duties, Section 301 tariffs and country-specific programmes — all of which sit on top and can exceed the base rate several times over. It is also not a landed cost for goods that need a licence, a sanitary certificate, or a pre-shipment inspection, because those add a fixed fee and, more importantly, a delay.
It is also not a duty-paid cost if you are VAT-registered in the destination country: for you, import VAT is a cash-flow item, and the number above should be read net of it. The calculator lets you switch that treatment on or off, and the difference is large enough to change a pricing decision.
Each one runs the arithmetic above on your own numbers. The guide explains why the figure is what it is; the tool produces it.
Landed Cost Calculator — the same engine that produced every figure on this page, with your carton, your route and your duty rate.
No. Landed cost stops when the goods are in your warehouse. Total cost of ownership adds storage, financing, insurance while in stock, shrinkage and the cost of the capital tied up. For a slow-moving SKU the second number is often larger than the first.
Include it only if you cannot recover it. A VAT-registered importer reclaims it, so it belongs in cash flow, not in cost. A non-registered importer, or one selling through a marketplace as a non-resident, has to carry it — and at 19–27% in most markets that is the largest number on the sheet.
Almost always one of three things: the forwarder quoted port-to-port and you costed door-to-door; the forwarder excluded duty and fees; or the per-unit figure was derived from an ideal carton count rather than the one the container actually accepts.
In the United States, no — duty is assessed on the FOB transaction value, so the sea leg is outside the customs value. In the EU, the UK, India and most of Africa and Latin America, duty is assessed on CIF, so freight is dutiable. The same shipment can therefore cost more to import into Hamburg than into Los Angeles at identical rates.
The guides that answer the question this one usually leads to.
Why a CIF price is not FOB plus freight, how the 110% insurance formula changes the arithmetic, and how to reverse a CIF quote correctly.
Read next → FreightWhy the nominal cbm on a container spec is not the capacity you get, how packing and the weight ceiling decide the real count, and what pallets cost.
Read next → FreightThe volumetric weight formula, which divisor applies to air, express and LCL, and how carton density tells you whether you pay for space or weight.
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