If you import products, you need to know your landed cost.
Not the price you paid the supplier. The real cost. Including everything it took to get that product to your warehouse.
Without this number, you’re guessing at your profit margins. And guessing gets expensive.
What is landed cost?
Landed cost is the total cost of a product when it lands at your door. Everything included.
It starts with what you paid the supplier. Then you add:
- Shipping and freight
- Customs duties and tariffs
- Insurance
- Port handling fees
- Trucking to your warehouse
- Inspection fees
- Broker fees
- Any other costs
Add it all up. Divide by the number of units. That’s your landed cost per unit.
Why most importers get this wrong
Here’s what usually happens.
You buy 1,000 units at $5 each. Easy. Your cost is $5.
But wait. Shipping was $800. Duties were $600. Insurance was $150. Port fees were $200. Trucking was $300.
That’s $2,050 in extra costs. Or $2.05 per unit.
Your real cost isn’t $5. It’s $7.05.
If you priced your product thinking it cost $5, you might be losing money on every sale.
The landed cost formula
Here’s the simple version:
Landed Cost = Product Cost + Shipping + Duties + Insurance + Handling + Other Fees
Let’s break down each part.
Product cost
What you paid the supplier. Make sure you use the right currency and exchange rate.
If you paid 5,000 Euros and the rate was 1.10, your product cost in USD is $5,500.
Shipping and freight
All costs to move the goods from the supplier to the port, across the ocean, and to your destination port.
This might include:
- Factory to port (origin)
- Ocean or air freight
- Port fees at origin
- Port fees at destination
Get these numbers from your freight forwarder.
Customs duties
Taxes charged by your country when goods arrive. The rate depends on what you’re importing and where it comes from.
Look up the HS code (Harmonized System code) for your products. This tells you the duty rate.
Example: If duties are 5% and your product value is $5,000, you pay $250 in duties.
Insurance
Cargo insurance protects you if goods are damaged or lost. Usually 0.5% to 2% of the product value.
Even if you don’t buy insurance, you should know what it would cost. That’s real risk.
Handling fees
Costs to unload, store, and move containers. This includes:
- Terminal handling charges
- Warehouse receiving
- Inspection fees if required
Broker fees
If you use a customs broker to clear your goods, they charge fees. Usually a flat rate or percentage.
Other costs
Anything else that applies:
- Storage at port if you’re delayed
- Fumigation or special treatment
- Documentation fees
- Banking fees for international transfers
Example calculation
Let’s work through a real example.
You’re importing 500 units of a product from China.
| Cost Item | Amount |
|---|---|
| Product cost (500 × $10) | $5,000 |
| Ocean freight | $1,200 |
| Origin port fees | $150 |
| Destination port fees | $200 |
| Customs duties (8%) | $400 |
| Insurance (1%) | $50 |
| Customs broker | $100 |
| Trucking to warehouse | $250 |
| Total | $7,350 |
Landed cost per unit: $7,350 ÷ 500 = $14.70
Your unit cost isn’t $10. It’s $14.70. That’s a 47% difference.
How to allocate costs across products
Most shipments have multiple products. How do you split the shipping and other costs?
There are three common methods:
By value
Split costs based on each product’s share of total value.
Example: Product A is worth $3,000, Product B is worth $2,000. Total is $5,000.
Product A gets 60% of shipping costs ($3,000 ÷ $5,000). Product B gets 40% of shipping costs.
This is the most common method.
By weight
Split costs based on weight. Good for heavy products where weight drives shipping cost.
By quantity
Split costs equally by unit count. Simple but often not accurate.
Common mistakes
Forgetting currency conversion
If you buy in foreign currency, convert everything to your home currency at the actual rate you paid.
Missing small fees
Port fees, documentation, banking charges. They seem small but add up. A $50 fee on 500 units is $0.10 per unit. Ten of those fees is $1 per unit.
Not updating for each shipment
Duty rates change. Freight rates change. Exchange rates change. Calculate landed cost for each shipment, not once a year.
Using estimated duties
Look up the actual duty rate. Don’t guess. Use the right HS code.
How to track landed cost
Manual method
Create a spreadsheet for each shipment. List every cost. Calculate the total. Divide by units.
This works but takes time. And you have to remember to update your inventory costs.
Integrated method
Use software that calculates landed cost as you receive goods. Costs get assigned automatically. Your inventory value is always correct.
This is what Magnofy does. When you receive an import shipment, you enter all the costs. The system spreads them across products and updates your inventory cost automatically.
Why this matters for pricing
If you don’t know your landed cost, you can’t price correctly.
Let’s say you want a 30% margin.
If you think your cost is $10, you’d price at $13. If your real landed cost is $14.70, you’d need to price at $19.
At $13, you’re not making 30%. You’re losing $1.70 per unit.
Knowing your landed cost protects your profits.
Getting it right every time
Here’s a checklist for every import shipment:
- Record the supplier invoice in your currency
- Get all shipping documents with costs
- Get the customs entry with duties and fees
- Get invoices for trucking and handling
- Add everything up
- Divide by units received
- Update your inventory cost
Do this for every shipment. Your profit numbers will finally be accurate.
The bottom line
Landed cost isn’t complicated. It’s just thorough.
Add up every cost to get the product to your warehouse. That’s your true cost. Use that number for pricing and margin decisions.
Get it wrong and you might be losing money without knowing it. Get it right and you’ll finally see your real profits.
Want software that calculates landed cost automatically? Get a demo and see how Magnofy handles import costing.