Export & logistics
Understanding landed cost: what it actually includes
A common pricing mistake is quoting off the FOB or ex-works price and discovering the real cost only when the goods have already landed. Landed cost is the total cost to get goods to your door, and it is the number a buyer should actually price against.
Key facts
- Landed cost = FOB value + freight + insurance + import duty + VAT or GST + other charges (handling, inspection, brokerage) — not just the FOB price on the invoice.
- FOB + freight + insurance gives you the CIF value, and duty and VAT are usually calculated on that CIF figure, not the bare FOB price; most countries charge duty on CIF, a few use FOB instead.
- The most common gaps in a quick estimate are freight and insurance left out entirely, and duty rate misclassification (wrong HS code or a missed FTA preference), plus catch-all fees like destination handling, customs brokerage, inspection, and demurrage.
- Real margin is sell price minus landed cost per unit, not sell price minus FOB, and it should be recalculated per shipment since freight rates and duty preferences change.
What landed cost adds to FOB
Landed cost = FOB value + freight + insurance + import duty + VAT or GST + other charges (handling, inspection, brokerage). The first three (FOB, freight, insurance) give you the CIF value; duty and VAT are usually calculated on top of that CIF figure, not on the bare FOB price, which is where a lot of quick estimates go wrong.
Most countries charge duty on the CIF customs value; a few use FOB instead. The difference matters: a 5% duty on CIF is a bigger number than 5% on FOB, since CIF already includes freight and insurance.
Where the surprises usually hide
Freight and insurance are the two costs most often left out of a back-of-envelope estimate, especially on FCL or LCL lanes with volatile rates. Duty rate misclassification is the second most common surprise: the wrong HS code or a missed FTA preference can move the rate by several percentage points.
"Other charges" is the catch-all for the fees that show up after the fact: destination handling, customs brokerage, inspection fees, demurrage if the container sits too long. None of these are large individually, but they add up on thin margins.
Pricing off landed cost, not FOB
Once you have a true landed cost per unit, your margin math is honest: sell price minus landed cost per unit is your real margin, not sell price minus FOB. This is the single biggest lever for catching a deal that looks profitable on the invoice and is not once duty and freight land.
Recalculate per shipment, not once per product. Freight rates and duty preferences change, and a landed cost calculated in January can be wrong by March.
Try the free landed cost calculator
FOB plus freight, insurance, duty and VAT to a true landed cost, per shipment and per unit.
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