Landed Cost Guide

What is landed cost?

Landed cost is the total cost of a product by the time it physically arrives at your warehouse, shop or fulfilment centre. It includes every cost incurred from the moment you place a purchase order to the moment the goods are on your shelf and ready to sell or use.

The supplier’s invoice price is only the starting point. International freight, marine or air cargo insurance, import duty, import VAT or GST, customs brokerage fees, port handling charges, and domestic delivery all add to the cost. Landed cost — not ex-factory price — is the correct base for gross margin calculations on imported goods.

The landed cost formula

Each component explained:

• Product cost — the price you pay the supplier, typically ex-works (EXW) or FOB.
• International freight — sea freight (per CBM or per container), air freight (per chargeable kg), or courier charges.
• Insurance — marine or cargo transit insurance, typically 0.3%–1.5% of CIF value.
• Import duty — ad valorem duty based on HS code, origin country, and customs value.
• Import VAT/GST — charged on (customs value + duty) at the destination country’s rate.
• Brokerage fees — customs broker charges for preparing and filing the import declaration.
• Destination handling — port/terminal handling charges, container drayage, and delivery to warehouse.

Why checkout price is not final cost

Whether you are a business importing containers or a consumer buying a single item from an overseas marketplace, the price shown at checkout is almost never the total cost of getting the product to you. For businesses, freight and duty can add 15%–40% on top of supplier price depending on the product, origin and route. For consumers ordering from platforms like AliExpress or Temu, duty and import VAT can be collected at delivery (if not pre-paid) and the surprise payment can be significant relative to the low product price.

Low-value parcels and China-to-Europe e-commerce

Until recently, parcels below certain de minimis thresholds (such as €150 in the EU) were exempt from customs duty. However, all parcels entering the EU have been subject to import VAT since July 2021 regardless of value. The EU has also proposed eliminating the €150 duty exemption entirely, which would mean even a €5 phone case from China carries a duty liability.

For sellers and marketplaces, this means every cross-border parcel must be treated as a landed-cost calculation — with HS classification, duty rate lookup and VAT application — even at very low order values. The operational overhead is disproportionate to the parcel value, which is why platforms like IOSS (Import One-Stop Shop) exist to simplify VAT collection at point of sale.

Worked example

Common mistakes to avoid

• Using FOB price as your cost base for margin — this overstates gross margin because it ignores freight, duty and handling costs.
• Forgetting destination handling charges — port charges, container drayage and last-mile delivery can add £150–£500 per shipment.
• Ignoring customs brokerage — broker fees are modest per entry (£50–£150) but add up across many shipments and must be included in unit cost.
• Not checking whether VAT is reclaimable — if you are not VAT/GST-registered, import VAT is a hard cost and must be included in your landed cost.
• Assuming duty is the same for all origins — FTA preferences can reduce duty to zero; anti-dumping duties can increase it dramatically. The origin matters as much as the HS code.

How the Landed Cost Calculator helps

The Landed Cost Calculator automates the arithmetic above. Enter supplier cost, freight, insurance, duty rate, VAT rate and handling charges, and it returns total landed cost and landed cost per unit. Use it to compare sourcing options from different countries, test different shipping modes (air vs sea), or check how duty-rate changes affect your margins.

To estimate the duty component, use the HS Code Duty Calculator. For VAT calculations, the VAT Calculator handles add-VAT and remove-VAT scenarios. The Shipping Cost Calculator can help estimate the freight component.