Landed Cost
The total cost of a product delivered to your warehouse, including the product price, shipping, insurance, customs duties, customs broker fees, and drayage. The true cost you must use for pricing and margin calculations.
Landed cost is the total, all-in cost of getting a product from the factory to your warehouse shelf, ready to sell. It is the number that matters for your business -- not the FOB price the factory quotes. Landed cost includes: the product cost (FOB or equivalent), ocean/air freight, marine cargo insurance, customs duties (based on HTS classification and country of origin), merchandise processing fee (MPF, 0.3464% of goods value, capped at $538.40), harbor maintenance fee (HMF, 0.125% of goods value), customs broker fee, drayage (trucking from port to warehouse), warehouse receiving costs, and any inspection or testing fees.
A common mistake for new importers is basing pricing decisions on the FOB cost. The additional costs from factory to warehouse typically add 25-50% to the FOB price, depending on the product, shipping mode, and duty rate. For example: a product quoted at $5.00 FOB China might have a landed cost of $7.50 per unit after freight ($0.50), duties ($1.25 at 25%), and other logistics costs ($0.75). If you priced based on $5.00 cost, your margins are much thinner than you thought.
Calculate your landed cost before committing to any order. Create a landed cost spreadsheet that accounts for every line item between FOB and warehouse receipt. Update it with actual costs after each shipment and use the actual landed cost (not estimates) for future pricing decisions. Freight rates, exchange rates, and duty rates all fluctuate, so your landed cost is a moving target that needs regular monitoring.
Why it matters
Build a landed cost calculator spreadsheet that accounts for every cost between FOB and your warehouse. The total typically adds 25-50% to the FOB price. Never set retail pricing based on FOB cost alone.
Practical Tip
Build a landed cost calculator spreadsheet that accounts for every cost between FOB and your warehouse. The total typically adds 25-50% to the FOB price. Never set retail pricing based on FOB cost alone.
You'll hear this when…
When arranging payment
“"The factory requires a Landed Cost before they'll book production time on their line."”
When reviewing an invoice
“"Our accountant flagged the Landed Cost terms on this supplier invoice — make sure they match the contract."”
When negotiating terms
“"We proposed net-30 but the supplier countered with Landed Cost — standard for first-time buyers."”
Related Terms
Free on Board
FOBAn Incoterm where the seller delivers goods on board the vessel at the named port of shipment. Risk transfers from seller to buyer once goods pass the ship's rail.
Harmonized Tariff Schedule
HTSThe US system for classifying imported goods and determining applicable duty rates. Every imported product is assigned an HTS code that determines how much customs duty you pay.
Customs Broker
A licensed professional authorized to clear goods through customs on behalf of importers. In the US, customs brokers must hold a federal license and are responsible for correctly classifying goods, calculating duties, and ensuring regulatory compliance.
Freight Forwarder
A logistics company that arranges international shipping on your behalf, handling booking cargo space, documentation, customs brokerage, and coordinating the door-to-door movement of your goods.
Duty Drawback
A refund of customs duties paid on imported goods that are subsequently exported, either in their original form or as part of a manufactured product. A powerful cost recovery tool for brands that sell internationally.
This term appears in every Bottlecap report.
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