The complete guide to calculating the true total cost of getting a product from factory floor to your warehouse, including every charge along the way.
Landed cost has six major categories: product cost (the FOB or Ex Works price), international transportation (ocean or air freight), insurance, customs charges (duties, tariff surcharges, MPF, HMF), brokerage and compliance costs, and last-mile logistics (port to warehouse). Each category contains multiple line items that vary by product, route, and service level.
Start with the supplier's FOB price. Add international freight costs (ocean freight averages $0.10-$0.50/unit for sea; $3-$8/kg for air). Add cargo insurance (typically 0.3-0.5% of shipment value). Layer in customs duties by applying the applicable tariff rate to the customs value. Add MPF, HMF, and brokerage fees. Finally, include domestic trucking from port to warehouse. Sum all components for total landed cost.
Accurate landed cost data drives three critical business decisions: pricing (ensuring every product is sold at a profit), sourcing (comparing the true cost of different suppliers and countries), and inventory (understanding the cash tied up in each unit of stock). Without landed cost visibility, you are making these decisions with incomplete information.
Landed cost is the total cost of a product delivered to your door, including the purchase price, shipping, insurance, customs duties, taxes, currency conversion, and handling fees. It represents the true cost of goods before any domestic selling expenses are added.
Landed Cost = Product Cost (FOB) + International Freight + Insurance + Customs Duties + Tariff Surcharges + MPF + HMF + Customs Brokerage + Inland Freight + Handling Fees. Each component varies by product, origin country, and shipping method.
Landed cost determines your true cost of goods sold and therefore your actual profit margin. Many e-commerce sellers underestimate their COGS by ignoring duties, freight, and fees, leading to inaccurate pricing and unexpectedly thin margins. Knowing your landed cost ensures profitable pricing.
Tariffs can be the largest variable component of landed cost. On a $10 FOB product from China, a 30% combined tariff rate adds $3.00 to the landed cost. Switching to a country with 10% tariffs reduces that component to $1.00, saving $2.00 per unit before considering other cost differences.
Calculate both. Per-shipment landed cost helps with cash flow planning and purchase order decisions. Per-unit landed cost is essential for pricing, margin analysis, and comparing sourcing alternatives. Some costs like brokerage fees are per-shipment, so per-unit cost decreases with larger order quantities.
MarginHub computes the complete landed cost for every product in your catalog, updating automatically when tariff rates or freight costs change.
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