A step-by-step method to calculate the landed cost of products from China, from the unit price to freight, duties, taxes and fees, so you can price with confidence.
The unit price on a supplier’s quote is only the start. Landed cost is the total cost of getting a product to your warehouse, ready to sell. If you set your prices on the factory price alone, your margin can disappear before your first sale.
The formula
Landed cost per unit = (product cost + all costs to bring it to your warehouse) ÷ number of units
The costs to include:
- Product cost: unit price × quantity, at the Incoterm in the quote.
- One-off costs: samples, tooling, molds and packaging design, spread over the order.
- Costs in China: inland transport, export clearance and consolidation, if not included in the price.
- Quality control: inspections before shipment.
- International freight: sea, air or rail.
- Insurance: usually a small percentage of the value, but essential.
- Customs duty: depends on the HS code and the customs value.
- Import taxes: import VAT or sales tax. Businesses can often recover VAT, but you still need the cash when the goods arrive.
- Destination charges: port and terminal fees, customs broker and documentation fees.
- Last-mile transport: from the port or airport to your warehouse.
- Currency and bank costs: exchange rates and transfer fees.
An illustrative example
Imagine 1,000 units at 4.00 per unit, FOB. These numbers are hypothetical, only to show the method:
| Item | Total |
|---|---|
| Product (1,000 × 4.00) | 4,000 |
| Inspection | 300 |
| Sea freight and insurance | 700 |
| Customs duty (example rate on the customs value) | 280 |
| Destination charges and broker | 250 |
| Transport to warehouse | 150 |
| Bank and currency costs | 70 |
| Total | 5,750 |
Landed cost per unit: 5,750 ÷ 1,000 = 5.75, which is 44% more than the FOB price. Import VAT is left out here because it is usually recoverable, but plan for the cash flow.
Common mistakes
- Comparing quotes with different Incoterms. An EXW price and a DDP price are not comparable. See Incoterms explained.
- Using real weight instead of chargeable weight for air freight.
- Forgetting destination charges. They can be significant, especially for small shipments.
- Ignoring the cost of defects and returns.
- Not updating the calculation when freight rates or exchange rates change.
Use landed cost to make decisions
- Set your selling price and check your margin before you order.
- Compare suppliers on their real cost, not their quoted price.
- Find where to save: packaging, shipping method or order size.
We list what usually gets left out in the hidden costs of importing from China.
At Zyntral we work with itemized costs from the start, so you know what you are paying for at each step. See how it works in our End to End import service.
