How to calculate landed cost for accurate pricing

Landed cost is the total price of a product once it arrives at the buyer's door. It includes the product cost plus all expenses incurred to get it there. Accurate landed cost calculation is essential for competitive pricing and healthy profit margins.

Components of Landed Cost

1. Product cost — The price you pay the supplier (per the agreed Incoterm).
2. Inland freight (origin) — Trucking from factory to port or airport. Included in FOB/CIF but not in EXW.
3. International freight — Ocean, air, or overland transport cost. Included in CIF/CFR/CPT but not in FOB/FCA/EXW.
4. Cargo insurance — Typically 0.3–1.5% of CIF value for standard goods; higher for fragile or high-value items.
5. Customs duties — Based on the HS code and applicable tariff rate (MFN or preferential).
6. Import VAT or GST — Applied on (customs value + duty) in most countries.
7. Customs brokerage fees — Your broker's service charge for filing the import declaration.
8. Port handling and terminal charges — THC (Terminal Handling Charge), documentation fees, and container drayage.
9. Inland freight (destination) — Trucking from port to your warehouse.
10. Inspection and testing — Pre-shipment inspection fees, lab testing if required.
11. Bank charges — LC issuance fees, amendment costs, wire transfer fees.

Formula

Landed Cost = Product Cost + Origin Logistics + International Freight + Insurance + Duties + Taxes + Destination Logistics + Fees

On Faktorist

The Landed Cost Calculator on each deal page auto-fills known components (product price, Incoterm, HS code, duty rate) and lets you input estimates for logistics and fees. Use it to compare supplier bids on a true like-for-like basis.