"The product is only $3.20 per unit!" is the most dangerous sentence in importing. After shipping, customs duties, handling fees, and a dozen hidden charges, that $3.20 unit actually costs $5.80 - and if you set your retail price based on $3.20, you're losing money on every sale.
Landed cost is the total cost of a product arriving at your door, including every fee between the factory floor and your warehouse shelf. Getting it wrong by even 10% can turn a profitable product into a cash-burning disaster.
Key Takeaways
- Landed cost = Product + Freight + Insurance + Duty + VAT/Tax + Handling + Last Mile
- Most importers underestimate by 20+% because they forget 3 key cost components. A Freightos Market Update shows ocean freight rates fluctuate 30+% seasonally.
- The product cost is only 55+% of your true landed cost for most categories
- Calculate landed cost before negotiating with suppliers - it determines your maximum product price
- US importers: the de minimis exemption for China was eliminated in 2025 - every shipment pays duty now
The 7 Components of Landed Cost
| Component | % of Landed Cost | Description |
|---|---|---|
| Product cost (FOB) | 55+% | Unit price x quantity |
| Freight | 10+% | Shipping from China to destination port/airport |
| Insurance | 0.3-1% | Cargo loss/damage coverage |
| Import duty | 5+% | Tariff based on HS code + Section 301 |
| VAT/Sales tax | 0+% | EU: 19+% VAT. US: no federal import VAT |
| Handling fees | 3-5% | Customs brokerage, THC, documentation |
| Last mile | 2-5% | Drayage from port to warehouse, or FBA delivery |
Component 1: Product Cost (FOB)
The FOB (Free On Board) price is what you pay the supplier. It includes manufacturing, packaging, and delivery to the Chinese port.
Common trap: Some suppliers quote EXW (Ex Works) price, which is lower but doesn't include Chinese domestic freight to the port ($50+) or export customs documentation ($30+). Always compare FOB prices between suppliers.
| Pricing Term | Includes | Common Difference vs FOB |
|---|---|---|
| EXW | Factory gate only | FOB is $0.05+/unit higher |
| FOB | Factory + domestic freight + export customs | Baseline |
| CIF | FOB + ocean freight + basic insurance | CIF is $0.30+/unit higher |
Component 2: Freight
Freight cost depends on your shipping method:
| Method | Rate (China to US) | For 500 units @ 200g each |
|---|---|---|
| Sea LCL | $60+/CBM | $50+ |
| Sea FCL (20GP) | $1,400+ | $1,400+ (for full container) |
| Air freight | $4+/kg | $400+ |
| Express (DHL) | $8+/kg | $800+ |
Component 3: Insurance
Cargo insurance covers loss or damage during transit. Rates are typically 0.3+% of CIF value for sea freight, 0.4+% for air freight.
Example: CIF value $5,000 -> Insurance = $15-25
Most importers skip insurance on small orders under $5,000. We don't recommend that - a single container lost at sea or damaged in transit can wipe out months of profit.
Component 4: Import Duty
Duty is calculated based on your product's HS code and the declared customs value.
US Duty Calculation
Total duty = (Base MFN rate + Section 301 tariff) x Customs value (FOB)
Example: Silicone spatula (HS 3924.10.4000)
- MFN base rate: 3.4%
- Section 301 (List 4A): 7.5%
- Total rate: 10.9%
- On $3,200 FOB value: $3,200 x 10.9% = $348.80
EU/UK Duty Calculation
Total duty = MFN rate x Customs value (CIF)
EU VAT = (CIF + duty) x VAT rate
Note: EU/UK uses CIF value (includes freight and insurance), not FOB.
Component 5: Handling Fees
These are the "death by a thousand cuts" charges that make landed cost higher than expected:
| Fee | Typical Cost (US) | Typical Cost (EU) |
|---|---|---|
| Customs brokerage | $150+ | EUR 100+ |
| Terminal handling (THC) | $200+ | EUR 150+ |
| ISF filing (US only) | $25+ | N/A |
| Customs bond (US only) | $50+/year | N/A |
| Documentation fee | $30+ | EUR 30+ |
| Chassis rental | $30+/day | N/A |
| Demurrage (if late pickup) | $150+/day | EUR 100+/day |
Component 6: Last Mile
Getting goods from the port to your warehouse (or Amazon FBA center):
| Destination | Typical Cost |
|---|---|
| Drayage: Port to local warehouse (within 50 miles) | $200+ |
| Drayage: Port to warehouse (50+ miles) | $400+ |
| Amazon FBA delivery (freight forwarder handles) | $50+/pallet |
Worked Example 1: $5,000 Order from Yiwu to LA
Product: 2,000 silicone kitchen utensil sets Supplier: Yiwu factory, FOB Ningbo Shipping: Sea LCL (1.2 CBM, 180 kg)
| Component | Cost | Per Unit |
|---|---|---|
| Product cost (FOB) | $5,000 ($2.50/unit) | $2.50 |
| Freight (LCL, 1.2 CBM) | $144 | $0.07 |
| Insurance (0.4% of CIF) | $21 | $0.01 |
| Import duty (10.9%) | $545 | $0.27 |
| Customs brokerage + ISF | $200 | $0.10 |
| THC + documentation | $280 | $0.14 |
| Drayage (port to warehouse) | $300 | $0.15 |
| Total landed cost | $6,490 | $3.25 |
| Markup from FOB | +29.8% | N/A |
Supplymo Insight: That 29.8% markup from FOB to landed cost is typical for most consumer products shipped by sea to the US. We've analyzed 200+ shipments and the average landed cost multiplier is 1.25x the FOB price. For air freight, it jumps to 1.45x. For express, 1.60x. These multipliers are the quickest sanity check for any import: multiply your FOB price by 1.3 for sea and 1.6 for air, and you'll be within 5% of reality.
Worked Example 2: $2,000 Order from Guangzhou to London
Product: 500 LED desk lamps Supplier: Guangzhou factory, FOB Shenzhen Shipping: Air freight (80 kg actual, 120 kg volumetric)
| Component | Cost | Per Unit |
|---|---|---|
| Product cost (FOB) | $2,000 ($4.00/unit) | $4.00 |
| Freight (air, 120 kg x $5/kg) | $600 | $1.20 |
| Insurance (0.5% of CIF) | $13 | $0.03 |
| UK duty (6.5% of CIF) | $170 | $0.34 |
| UK VAT (20% of CIF + duty) | $557 | $1.11 |
| Customs clearance + handling | $200 | $0.40 |
| Last mile delivery | $150 | $0.30 |
| Total landed cost | $3,690 | $7.38 |
| Markup from FOB | +84.5% | N/A |
The UK example is dramatically higher because of 20% VAT and air freight. VAT alone adds $1.11/unit - more than the $0.03 insurance or $0.34 duty.
Hidden Costs Most People Forget
| Cost | When It Applies | Typical Amount |
|---|---|---|
| Demurrage | You don't pick up the container within the free window (3-5 days) | $150+/day |
| Storage | Goods sit at the port beyond free storage | $50+/day |
| Re-inspection | First QC inspection fails, need second | $250+ |
| Sample shipping | DHL fee for pre-production samples | $30+ per shipment |
| Defective units | 5+% defect rate if no QC | 5+% of product cost |
| Exchange rate fluctuation | USD/CNY moves between order and payment | 1-2% variance |
| Returns/reshipping | Customs rejects, wrong HS code, missing docs | $200+ |
Landed Cost Calculator
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FAQ
Q: What is landed cost and why does it matter?
Landed cost is the total cost of a product from factory to your warehouse shelf, including product price, shipping, insurance, duties, taxes, handling, and delivery. It matters because your profit margin is retail price minus landed cost minus marketplace fees - not retail price minus product cost.
Q: How much does shipping add to the product cost?
For sea freight: 10+% of FOB cost. For air freight: 20+%. For express: 30+%. The exact percentage depends on product weight, volume, and value.
Q: Is VAT included in landed cost?
For EU/UK importers: yes, VAT is a significant part of landed cost (17+%). For US importers: no federal import VAT, but you may owe state sales tax depending on your nexus.
Q: What's the difference between CIF and landed cost?
CIF (Cost + Insurance + Freight) only covers the product cost, insurance, and sea freight to the destination port. Landed cost includes ALL costs: CIF + duty + taxes + handling + last mile delivery. CIF is typically 70+% of your total landed cost.
Next Steps
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