What is total landed cost?
Total landed cost is the complete price of a product once it has arrived at your door, including every cost incurred from the point of manufacture to delivery at your warehouse. Many importers focus solely on the purchase price quoted by their supplier, but this represents only a portion of the true cost.
Understanding your total landed cost is essential for accurate pricing, profitability analysis, and making informed sourcing decisions.
The landed cost formula
Total landed cost equals the product purchase price plus international freight costs plus customs duties and taxes plus insurance plus domestic transportation plus handling and warehousing plus customs brokerage fees plus compliance costs.
Breaking down each component
Product cost
This is the price you pay your supplier, typically quoted as FOB (Free on Board), EXW (Ex Works), or CIF (Cost, Insurance, and Freight). The Incoterm used determines which costs are included in the supplier's price and which are your responsibility. Use our Incoterms guide at asrwe.com/tools/incoterms-guide to understand each term.
International freight
For ocean freight, costs vary based on whether you ship FCL or LCL, the trade lane, and market conditions. Air freight costs are based on weight and volume. Current rates are discussed in our ocean freight rates forecast article.
Customs duties
Duties are typically the largest cost after the product price and freight. Your total duty obligation includes the base MFN duty rate determined by your product's HTS classification, plus any additional tariffs such as Section 301 on Chinese goods, Section 232 on metals, and the Section 122 surcharge.
For a product from China with a 5% MFN rate, 7.5% Section 301 rate, and 10% Section 122 surcharge, the effective duty rate is 22.5% of the customs value.
Insurance
Cargo insurance typically costs 0.3% to 0.5% of the cargo value. While not legally required, it protects against loss or damage during transit. Use our insurance calculator at asrwe.com/tools/insurance-calculator to estimate your premium.
Domestic transportation
This includes drayage from the port to your warehouse, plus any inland trucking if your warehouse is not near the port of entry. Costs range from $300 to $2,000 depending on distance and container size.
Handling and warehousing
Terminal handling charges, unloading labor, and storage costs at your warehouse all add to the landed cost.
Customs brokerage
Customs broker fees typically range from $150 to $400 per entry, depending on the complexity of your shipment and any additional services required.
Example calculation
For a $50,000 shipment of electronics from China to Miami shipped via 40-foot container, the breakdown might look like this. Product cost is $50,000. Ocean freight is $3,200. Customs duties at 22.5% of $50,000 equal $11,250. Insurance at 0.4% of $50,000 equals $200. Drayage is $450. Customs brokerage is $250. Warehouse handling is $350. The total landed cost is $65,700, making the effective cost 31.4% higher than the purchase price.
Why landed cost matters
Accurate landed cost calculations enable you to set profitable prices, compare suppliers across different countries on an apples-to-apples basis, identify the biggest cost drivers and focus optimization efforts, make informed decisions about sourcing diversification, and budget accurately for import operations.
Get a landed cost analysis from ASR
Our team can help you calculate total landed cost for any product from any origin. We provide detailed breakdowns that include all duty scenarios, freight options, and cost optimization recommendations. Contact us at shipping@asrwe.com or request a quote at asrwe.com/quote.
