How to Calculate Landed Cost: Formula

A missing freight or duty line can make the cheaper China factory the costly order at your warehouse. Calculate landed cost by adding the goods amount to every extra charge that is not already inside another line, then divide by the units received.

Landed cost is the goods amount plus every extra charge required to bring that shipment to one named destination, with each charge counted once. Product sourcing in China costs the factory unit price and the charges that show up after the cartons leave the supplier: origin handling, international freight, cargo insurance, duty on a confirmed customs value, non-recoverable import tax, clearance, and delivery to your warehouse. Divide that total by the units received. A recoverable tax payment stays in a cash column with its own timing. A destination port, your warehouse door, and an Amazon receiving dock are different endpoints, so write the endpoint down before you rank two suppliers. The freight and logistics guides hold the shipping checks that sit beside this formula.

The landed cost formula

Use this warehouse worksheet:

Total landed cost
= goods and agreed packaging
+ additional origin and preparation costs
+ international freight and cargo insurance
+ import duty and non-recoverable import taxes
+ clearance and destination handling
+ delivery and receiving at the named warehouse

Landed cost per unit
= total landed cost / units received

The landed-cost calculator adds the goods quotation, then freight, insurance, and local fees only when you have not marked them as already included. Estimated duty equals the customs value you enter, times the duty rate you enter, divided by 100, rounded to cents. That duty is added only when it is not already inside the goods line. The customs value is the duty base. The calculator does not add it again as a cost, and it does not force the base to equal goods plus freight plus insurance.

What product sourcing in China costs before freight

The first number on a factory sheet is usually the unit price. Split it before you type one goods figure into the worksheet, and decide which calculator field each part belongs in.

A budget column is not a customs value. Under 19 CFR 152.103, US transaction value starts from the price actually paid or payable for the merchandise when sold for exportation to the United States. Additions, and no others, are packing costs incurred by the buyer, a selling commission incurred by the buyer, the apportioned value of an assist, certain royalties or license fees that are a condition of the sale, and proceeds of later resale that accrue to the seller. Those additions apply only to the extent they are not already in the price and the amount is supported. Example 2 in the assist provisions says molds the buyer supplies free of charge are an addition. Example 1 says design work undertaken in the United States is not added.

Where a landed-cost comparison fails

Rule of thumb. If the quote names a destination port and your endpoint is a warehouse, add clearance and inland delivery before you rank unit cost. Those charges sit outside a CIF port price.

Rule of thumb. If one SKU’s share of gross weight exceeds its share of the piece count, allocate weight-priced freight by gross weight. A piece-count split hides the heavy carton.

CIF and DDP change which lines you still add

The ICC Incoterms 2020 page lists eleven three-letter rules and says the costs for a given rule are gathered at article A9/B9. On that page, CIF is reserved for maritime trade, Institute Cargo Clauses (C) remain the default cover, and the parties can agree a higher cover. CIP requires cover compliant with Institute Cargo Clauses (A) or similar clauses.

The ICC Academy CIF article, by an ICC-certified Incoterms 2020 trainer, adds the operating detail. Under CIF the seller delivers the goods and transfers risk once the goods are on board the vessel at the named port of shipment. The seller arranges and pays for port-to-port carriage and insurance to the port of destination. CIF is for sea or inland waterway transport. The buyer completes import formalities, including customs procedures at transit or transshipment ports. Paying the ocean freight does not move the risk transfer to the destination port. Risk passes on board at the shipment port.

Under the Academy DDP article, the seller delivers when the goods are at the buyer’s disposal at the agreed point, ready for unloading from the arriving vehicle. The seller handles and pays export, transit, and import clearance. The buyer unloads, bearing the risk and, typically, the cost. If the transport contract already includes unloading, the Academy article says to tell the buyer so the unloading charge is not paid twice. Some import authorities require the local importer to clear the goods. In those cases the same article says DDP cannot be used.

Read the named place on the sheet you were given. A CIF price that stops at the destination port still needs clearance, duty, and warehouse delivery on your side of the worksheet. A DDP price that reaches the named place already carries import clearance, so you do not add a second duty line unless you have a charge the DDP sheet excludes, such as unloading.

Customs value is a different total from warehouse landed cost

The WTO technical note on customs valuation defines transaction value from the price actually paid or payable. Article 8 adjustments listed there include commissions and brokerage except buying commissions, packing and container costs, assists, royalties and licence fees, subsequent proceeds, and the cost of transport, insurance, and related charges up to the place of importation when the member values on a C.I.F. basis. Costs incurred after importation sit outside those adjustments.

US appraisement does not follow that C.I.F. addition. 19 CFR 152.103 Example 4 states that transaction value excludes C.I.F. charges, so the ocean freight and insurance in that regulatory example are excluded. Foreign inland freight that is inside the price is generally part of US transaction value. It can be treated as incident to the international shipment when it is identified separately and it occurs after the merchandise has been sold for export to the United States and placed with a carrier for through shipment.

Enter the duty base your broker confirms for the destination and the entry date. Match the commercial invoice lines to the packing list before that base is declared. The commercial invoice and packing list cross-check is the record for that match.

HMRC’s postponed VAT accounting page says a business registered for VAT in the UK can declare and recover import VAT on the same VAT Return, instead of paying it at import and recovering it later. The goods must be for use in the business, with the right to dispose of them, and the VAT registration number goes on the import declaration. Normal input-tax recovery rules still apply. You can use it for goods imported into Great Britain from outside the UK, and into Northern Ireland from outside the UK and the EU. A business does not need separate approval. When someone else files the declaration, HMRC requires written instructions before they use postponed VAT accounting. Goods received through the post in consignments of more than £135 via Royal Mail Group are outside this treatment. This is a UK cash-timing rule. It does not zero the tax in a US worksheet, and it does not belong in the unit-cost total when recovery applies.

Worked example with assumed inputs

Every dollar figure in this section is an assumption for the arithmetic. None of them is a freight offer, a duty rate, or a tariff.

Assume 1,000 identical units at $10 each. The endpoint is your warehouse. The $1,200 freight line already covers origin transport and international carriage. The $350 line covers clearance and port handling. The $250 line covers warehouse delivery and receiving. There is no separate testing, tooling, or extra tax in this scenario. The $600 duty line is an assumed amount, not a percentage of any base.

10,000 + 1,200 + 100 + 600 + 350 + 250 = 12,500
12,500 / 1,000 = 12.50 per unit
(12.50 - 10.00) / 10.00 = 0.25

The 25 percent gap above the goods price belongs to these assumptions. Copying it onto the next order will misstate a heavy carton, a different destination, or a different duty base.

One more assumption, still not a market rate: if the freight line is $300 higher and every other line stays fixed, the total is $12,800 and the unit cost is $12.80.

The same assumptions show a double count. Suppose the supplier sheet is an $11,300 CIF bundle that already contains the $10,000 goods, the $1,200 freight, and the $100 insurance. Add the outstanding assumed $600 duty, $350 clearance, and $250 delivery. The total is still $12,500. Adding the freight and insurance a second time produces $13,800.

Hold the packed specification still when you compare a second supplier. Supplier A’s assumed goods are $10,000 and other costs to the same warehouse are $2,500, so the landed total is $12,500. Supplier B’s assumed goods are $10,500 and other costs to that same warehouse are $1,000, so the landed total is $11,500. B wins that comparison only when B’s $1,000 really covers the same legs. A missing delivery leg is not a saving.

Put the same specification, carton size, and warehouse address on every sheet before you total them. The wholesale RFQ field list is the checklist for that scope. The shipping route and cost-check guide lists the packed dimensions a forwarder needs before two routes can be compared.

Allocate shared freight when the cartons differ

Dividing one shipment by every unit gives a blended average. It hides a SKU that is heavier, bulkier, or under a different duty treatment.

Assign a charge that belongs to one SKU to that SKU. Then split a shared charge on the basis that created it. Weight-priced freight follows gross weight. Volume-priced freight follows packed cubic volume. Insurance that follows insured value follows that value. A per-piece handling fee can follow quantity when the units take the same work.

Assume two SKUs share $600 of weight-priced freight. SKU A is 100 units and 200 kg. SKU B is 300 units and 100 kg. The shipment weight in this assumption is 300 kg.

SKU A freight = 600 × (200 / 300) = 400
SKU A per unit = 400 / 100 = 4.00
SKU B freight = 600 × (100 / 300) = 200
SKU B per unit = 200 / 300 = 0.666..., shown as $0.67

A quantity split would assign 600 / 400 = $1.50 to every unit and hide the heavier SKU. Keep full precision in the sheet and round the displayed unit amounts at the end so the two freight shares still add to $600.

If you combine suppliers before export, the pickup, storage, and repack have their own lines. The warehousing and consolidation steps are those lines, so a lower ocean bill can be set next to the handling it required.

Also split received units from sellable units. If the assumed $12,500 order has 1,000 received units and 980 sellable units, the cost per sellable unit is 12,500 / 980 = $12.755, which displays as $12.76. Keep the 20-unit gap on its own line. Do not rename it as freight.

Cash costs that never appear in the factory unit price

The factory unit price skips charges that still leave the bank account:

• The transfer fee and the conversion cost on the payment, recorded once from the debit advice.
• A second inspection after a failed check, on its own line for that lot.
• Consolidation storage and repack before the international bill.
• Unloading or a delivery appointment when the delivery line excluded them. The DDP unloading note above is the same trap on a delivered term.
• Prep, labels, and the receiving dock when the endpoint is Amazon. Extend the worksheet to that dock, and use the China to Amazon FBA handoffs for the carton and label work that creates those charges.

The China product sourcing guide places this worksheet after the approved sample and before the balance payment. A pending line at that point means the total is unfinished.

Worksheet fields to copy

Copy one block per charge: goods and packaging, preparation and origin, freight, insurance, duty, non-recoverable tax, clearance, delivery.

Cost item and SKU

________

Original amount and currency

________

Rate and date used to convert

________

Amount in the reporting currency

________

Status

Included in another line / additional / pending. Parent sheet: ________

Source

Document, person responsible, date: ________

After the charge blocks, record the total, the quantity label (ordered, received, or sellable), the unit cost, recoverable tax, and any unspent reserve. A reserve is cash planning until it is spent on a line that belongs in the total. Convert every line into one reporting currency before you add. Replace the planning conversion with the amount paid when the debit advice arrives.

Before you approve the purchase, confirm:

1. Goods, packaging, quantity, and the named warehouse match on every offer.
2. Each transport leg has a provider and an amount, or an open question with a name on it.
3. Freight, insurance, and import charges that sit inside a bundle are absent from the additional column.
4. Duty uses a confirmed customs value, classification, origin, and entry date.
5. Shared costs use one allocation basis, and the quantities say whether they are ordered, received, or sellable.
6. Someone will match invoices and the receipt count after arrival.

Method and sources

Legal and Incoterms statements on this page come from documents fetched on 17 October 2026: the ICC Incoterms 2020 page, the ICC Academy CIF/CIP and DAP/DDP articles, the WTO technical note on customs valuation, 19 CFR 152.103, and HMRC’s postponed VAT accounting guidance. Dollar lines in the worked example are assumptions chosen so the arithmetic is visible. They are not quotes and not duty rates. The calculator description matches the worksheet on this site: duty equals the entered customs value times the entered rate, and a cost marked as already included is not added again.