If you only look at the factory price, it is easy to make a bad buying decision.
The number that matters is landed cost: the full cost of getting a product shipped, cleared, taxed, and ready to sell. That means the supplier invoice is only the beginning. Freight, duties, VAT or GST, brokerage, handling fees, and Incoterms can change the real cost more than many buyers expect.
If you want the fast route, use our Import Duty & Landed Cost Calculator to estimate the full picture. But it helps to understand the logic behind the numbers too.
What landed cost means
Landed cost is the total delivered cost of imported goods by the time they arrive and clear customs.
In practical terms, it usually includes:
- product value
- freight or shipping cost
- insurance
- import duty
- VAT, GST, or sales tax
- brokerage or customs clearance fees
- handling, paperwork, and other extra charges
If you are pricing inventory for resale, landed cost is the number that should feed your margin calculations — not just the supplier quote.
What costs should be included
The exact mix depends on the route, country, carrier, and product type, but most import calculations start with the same core pieces.
1) Product value
This is the commercial invoice value from the supplier.
2) Freight or shipping
This is what it costs to move the goods from origin to destination.
3) Insurance
If cargo insurance is part of the shipment, include it.
4) Import duty
This is often based on the customs value and the duty treatment for the product category.
5) VAT, GST, or sales tax
In many cases, import tax is applied on top of the customs base plus duty.
6) Brokerage and handling fees
These can include customs clearance charges, admin fees, port fees, courier import fees, or other costs that show up after the goods move.
FOB vs EXW vs CIF in plain English
Incoterms matter because they change what is included in the shipment assumptions.
- EXW (Ex Works): the seller makes the goods available, and the buyer takes on more of the transport responsibility.
- FOB (Free on Board): the seller covers costs up to the point the goods are loaded for shipment, while the buyer handles the main transport and later stages.
- CIF (Cost, Insurance, and Freight): the seller includes freight and insurance to the destination port in the quoted arrangement.
For landed cost planning, this matters because it changes whether freight and insurance are already part of the quoted scenario or need to be added separately.
A simple landed cost example
Imagine you are importing a small inventory order with these numbers:
- product value: $1,000
- freight: $180
- insurance: $20
- import duty: 12%
- VAT or tax: 20%
- brokerage and extra fees: $45
Step 1: Calculate the customs base
If your scenario includes freight and insurance in the taxable base, the customs value could be:
$1,000 + $180 + $20 = $1,200
Step 2: Calculate duty
$1,200 × 12% = $144
Step 3: Calculate VAT or tax
If tax applies after duty, the taxable amount becomes:
$1,200 + $144 = $1,344
Then:
$1,344 × 20% = $268.80
Step 4: Add extra fees
Now add brokerage and handling:
$45
Step 5: Estimate total landed cost
$1,000 + $180 + $20 + $144 + $268.80 + $45 = $1,657.80
That is a very different number from the original $1,000 supplier invoice.
Why landed cost matters for pricing and margin
This is where a lot of small importers get caught.
A product can look profitable at the factory price and still become weak or unworkable once shipping, duty, tax, and extra fees are included.
Landed cost helps you:
- set resale pricing more realistically
- protect margin before placing an order
- compare suppliers more accurately
- avoid surprise costs that show up too late
- decide whether a shipment is still worth buying at all
If you also need help checking tax-only scenarios, our VAT Calculator is a useful companion.
Common mistakes people make
Looking only at the invoice price
This is the biggest mistake. The supplier quote is rarely the final cost.
Forgetting brokerage and handling
These smaller charges add up and are easy to miss during planning.
Treating all Incoterms the same
FOB, EXW, and CIF are not interchangeable. If you model them the same way, your cost estimate can drift fast.
Using one fixed duty assumption for every product
Actual duty treatment can vary by classification, origin, and current trade rules.
Setting customer prices before checking landed cost
That can leave you with margin that looked fine on paper but disappears after import charges land.
When to use a calculator instead of a spreadsheet
Spreadsheets are fine when you have a stable workflow and already know the logic. But if you want to test scenarios quickly, a calculator is faster and harder to mess up.
Use a calculator when you want to:
- compare multiple supplier scenarios fast
- test different duty or tax rates
- check how freight changes the total
- estimate whether a product still fits your target margin
- get a quick planning number before building a full sourcing sheet
Our Import Duty & Landed Cost Calculator is built for exactly that job.
FAQ
What is included in landed cost?
Usually product value, freight, insurance, duty, VAT or GST, brokerage, and other import-related fees.
Is landed cost the same as product cost?
No. Product cost is only one part of landed cost. Landed cost is the fuller number you need for pricing and margin decisions.
Do I always include freight and insurance?
Not always in the same way. It depends on the shipment terms, destination rules, and how the import calculation is structured.
Can I use a landed cost calculator for ecommerce?
Yes. It is especially useful for ecommerce sellers importing inventory and trying to price products without getting surprised by post-purchase charges.
Does this replace a customs broker?
No. It is a planning tool, not legal or customs advice. Final charges can vary depending on product classification, country rules, and carrier-specific fees.