What is landed cost? Meaning and how to calculate it
The factory price is only the start; margins are decided by landed cost.
Definition
Landed costLanded cost is the total cost of getting a product to the buyer’s warehouse or point of sale. It includes the purchase price plus freight, insurance, customs duties, import taxes that cannot be recovered, brokerage, port and handling fees, inspection, testing and any other costs incurred before the goods are ready to sell.
How to calculate landed cost for an imported product
Start from the factory price and the Incoterm in the quote. A price quoted EXW leaves almost everything else to you; a price quoted DDP includes most of it. Then add freight and insurance for the shipment, divided over the units by volume or weight, customs duty based on the product’s tariff classification and origin, and brokerage and port charges.
Then add what brand owners often miss: inspection before shipment, lab tests and certificates, packaging made by a separate supplier, inbound freight to a fulfilment centre, marketplace inbound fees, and currency costs if you pay the factory in a different currency. Recoverable VAT is usually excluded from landed cost, but it still affects cash flow until it is reclaimed. Add a margin for damage too.
Calculate it per SKU, not as a single average. A bulky product shares a container very differently from a small one. Repeat the calculation for each market, because duties and fees differ, and rerun it when freight rates or tariffs change. A margin that looks healthy on factory price can disappear once landed cost is complete. Keep the worksheet with the assumptions visible, such as freight per container and duty rate, so that anyone can see which figure moved.
Our calculator estimates the full cost chain, and the guide own brand unit economics shows how landed cost feeds into margin.
Related terms
Incoterms
ICC trade terms that set where delivery happens and how risk and costs split between buyer and seller.
Gross margin
Revenue minus the cost of goods sold, shown as a percentage of revenue.
Contribution margin
What a sale leaves after all variable costs, to cover fixed costs and profit.
FOB (Free on Board)
The seller delivers goods on board the vessel at the port of shipment; the buyer handles the rest.
DDP (Delivered Duty Paid)
The seller delivers to the named destination, cleared for import with duties paid.
Frequently asked questions
What is included in landed cost?
Product price, freight, insurance, customs duty, non-recoverable taxes, brokerage, port and handling fees, inspection, testing and any inbound logistics before the goods can be sold.
Is VAT part of landed cost?
Import VAT that a VAT-registered business can reclaim is usually left out of landed cost but included in cash flow planning. Non-recoverable taxes should be included. Check the treatment with your accountant.
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