Landed cost calculation: the number that actually tells you if an import is profitable
Every importer has been burned by this at least once. You get a factory quote, it looks solid, you do the math on margin, and then the shipment arrives and the total cost is 30% higher than you planned. Freight, customs duty, VAT, port charges, local delivery — none of that was in the factory price.
Landed cost is the sum of everything it takes to get a product from the supplier's door to your warehouse. It's the only number that tells you whether an import actually makes money.
What goes into a landed cost?
Break it into four layers:
- Goods cost — factory price, including any packaging specified in your PO. Also check whether the Incoterm shifts some early costs to you (more on that below).
- Freight and insurance — ocean, air, or rail freight to your country, plus cargo insurance. Compare rates by route here.
- Import duties and taxes — customs duty (based on the HS code of your product), VAT or GST on the dutiable value, and any anti-dumping or countervailing duties that apply to China-origin goods.
- Destination charges — these are the ones people forget. Port handling, customs clearance fees, import broker fees, inland delivery to your warehouse, and sometimes devan (container unpacking) charges if you're on LCL.
A rough worked model: say you're buying $10,000 worth of furniture CIF (cost, insurance, freight included to your port). The duty rate is 7%, applied to the CIF value. VAT is 20%, applied to CIF + duty. Customs broker: $350. Drayage to warehouse: $280.
- Goods (CIF): $10,000
- Duty (7%): $700
- VAT (20% of $10,700): $2,140
- Broker + drayage: $630
- Total landed: $13,470
That's 34.7% on top of the factory price. If you priced the product at $12,000 landed expecting a margin, you're already underwater.
Why do people miss destination charges?
A few reasons. Freight quotes from forwarders often stop at the origin port or destination port. You get a "rate to Long Beach" and assume the rest is rounding error. It isn't.
Destination THC (terminal handling charge), documentation fees, customs exam fees (random inspections aren't free), and chassis fees for container pickup can easily add $400–800 per container for a US import. On smaller shipments, those fixed charges hit proportionally harder.
Does the Incoterm change the calculation?
Yes, a lot. EXW (Ex Works) means you're responsible for costs from the factory gate onward — including the domestic Chinese trucking to the port, export clearance, and all freight. FOB shifts export clearance to the supplier but you still pay freight and everything after. CIF includes freight and insurance to destination port, but nothing beyond the port gate.
Changing the Incoterm doesn't change the total landed cost — it changes who pays what. But it does affect what ends up in your P&L versus the supplier invoice. If you're comparing quotes across suppliers using different Incoterms, normalize them to landed cost first or you're comparing apples to hammers.
A simple formula to run every time
```
Landed cost = Goods (at factory)
+ Origin charges (trucking, export clearance)
+ Freight + Insurance
+ Import duty (% × dutiable value)
+ VAT/GST
+ Destination charges (THC, broker, drayage, devan)
```
The dutiable value depends on the Incoterm and your country's customs rules. Most countries use CIF value as the base; the US uses FOB. Check the rules for your destination — it changes the duty calculation meaningfully.
How does this tie to freight mode?
Air freight can be 4–6x the cost of ocean per kilogram, which blows up the landed cost on heavy or dense goods. But for light, high-value products — electronics, watches, fashion — air's speed reduces the capital tied up in transit, which has its own cost.
The freight estimator lets you run ocean vs air vs rail for a given shipment so you can see how each mode lands in your total cost model, not just the freight line item.
What to do before you commit to a product
Before you place a first PO with a new supplier, run a landed cost model using:
- A real freight quote for your expected volume (not a spot rate from 18 months ago).
- The correct HS code for your product — a wrong code means a wrong duty rate. See the HS code guide.
- Destination charges from your customs broker, not an estimate.
Pricing off factory price alone is how margins disappear by the time the container reaches the dock. Build landed cost into the model from day one.
---
Get a fast freight estimate to anchor your landed cost model — try the ChinaLogisticHub estimator with your route and cargo details.