Calculating the landed cost of an imported product: method and costed example

What is the landed cost of an imported product?

Landed cost is the full cost of one unit delivered to your warehouse, customs-cleared and ready for sale. It, and not the factory quote price, sets your real margin and lets you compare suppliers and modes of transport.

Everything starts with the Incoterms® rule in the quote (Incoterms® is a registered trademark of the International Chamber of Commerce, ICC), which allocates costs and risks between seller and buyer. Under EXW (Ex Works), you pay for everything from the factory; under FOB (Free On Board), the supplier pays up to the vessel, export clearance included. See our complete guide to Incoterms® 2020.

The landed cost line items, from the factory to your warehouse

Factory price and currency

A Chinese quote is often denominated in US dollars (USD) or yuan (CNY), and the rate moves between the deposit and the balance. Budget a prudent rate, plus the currency margin and bank fees.

Customs, for its part, converts at the official customs exchange rate for the month, which may differ from yours (see the FAQ).

Tooling and samples

Tooling is paid once but serves several orders: amortize it over the first order (prudent) or over the planned volume (more accurate if repeat orders are likely), and note the assumption.

It also enters the customs value, the basis for calculating duties. In the EU, paid to the supplier as a condition of the sale, it forms part of the price paid (Union Customs Code, art. 70); supplied by the buyer free of charge or at a reduced price, it is added to it (art. 71). The US treats buyer's contributions to the manufacturer (tooling, molds, materials) in the same way, as assists. Have the allocation validated by your customs broker, who files your declarations.

Packaging, quality control, transport in China

Packaging invoiced separately is added to the customs value, in the EU as in the US. An inspection, invoiced at a flat fee per batch, weighs little on 4,000 units and more on 300: compare it with the cost of a defective batch discovered on arrival (see when to inspect).

Under EXW, add pickup, transport to the port and export clearance: this journey within China enters the customs value in both the EU and the UK.

Main freight: container, m³ or chargeable kilo

• Full container load (FCL): one price per box. Internal volumes according to Maersk: 33 m³ (20-foot), 67 m³ (40-foot), 76 m³ (40-foot high cube), with the chargeable volume being lower.
• Less than container load (LCL): billed by weight or volume, whichever is higher, on the basis of 1 m³ = 1,000 kg.
• Air freight: volumetric weight = L × W × H (cm) ÷ 6,000, the IATA (International Air Transport Association) standard, sometimes ÷ 5,000. You pay the higher of actual weight and volumetric weight.

So a carton of 60 × 40 × 40 cm weighing 9 kg is billed at 16 kg by air. Add surcharges (fuel, peak season, security), which HMRC, the UK tax and customs authority, includes in the customs value. See ocean freight, FCL, LCL and containers.

Insurance and destination charges

Under CIF (Cost, Insurance and Freight), the seller owes only minimum cover (clause C of the Institute Cargo Clauses, the standard transport insurance terms); under CIP (Carriage and Insurance Paid To), Incoterms® 2020 require extended cover (clause A).

On arrival, add THC (Terminal Handling Charges), the freight forwarder and the declaration. A container that lingers at the terminal incurs demurrage, and a late empty return incurs detention charges, often billed per day.

Customs duties: on what value?

A customs duty is a rate multiplied by a customs value. The rate depends on the product's tariff code, built on the international Harmonized System (HS); the definition of value, however, varies by country of arrival.

European Union and United Kingdom. The price paid is increased by, among other things, selling commissions, packing, the buyer's inputs, royalties, and transport and insurance up to entry into the territory; buying commissions and subsequent transport are excluded (Union Customs Code, arts. 70 to 72; HMRC guidance). TARIC also shows any anti-dumping duties.

United States. Transaction value (the invoiced price, adjusted under the law) excludes international transport and insurance, but adds packing, selling commissions, assists and royalties. CBP (U.S. Customs and Border Protection) also collects the Merchandise Processing Fee (MPF): 0.3464% of value, between $34.58 and $670.86 per formal entry as of October 1, 2026. For ocean freight, the Harbor Maintenance Fee (HMF) of 0.125% applies on top.

For a product of Chinese or Hong Kong origin, add the Section 301 additional duties (chapter 99 of the HTSUS): since July 24, 2026, 12.5% on most of these products, excluding exemptions (notably steel, aluminum, copper, vehicles and their parts, wood products, semiconductors). Older Section 301 duties, set by product lists (up to 100% on electric vehicles since 2024), may also apply. The 2025 IEEPA duties (International Emergency Economic Powers Act), meanwhile, were struck down by the Supreme Court in February 2026 and CBP is organizing refunds. Check the rate as of the date of importation.

Related guide

Clearing an import from China: EU, UK, US, Canada

Identifier, tariff code, value, origin, taxes: clearing Chinese goods in the EU, the UK, the US and Canada, up to date with the September 2026 rules.

14 min read

Import VAT and taxes: cash flow, not a cost

In the EU, the rule is common: import VAT applies to the customs value, increased by duties and incidental charges (commission, packing, transport, insurance) up to the first place of destination (Directive 2006/112/EC, arts. 85 and 86). The standard rate is national: 20% in France, 19% in Germany, and from 17% (Luxembourg) to 27% (Hungary) depending on the country.

A taxable business with a full right of deduction recovers this VAT. In France, since January 1, 2022, reverse charging is automatic and mandatory for any VAT-registered taxable person: import VAT is declared and deducted on the same return, with no cash outlay. Other EU countries may provide comparable arrangements.

In the UK, the base follows the same logic: customs value, duties and charges up to the first destination (clearance, handling, storage, demurrage). Postponed VAT accounting lets a UK VAT-registered business declare and recover this VAT (standard rate of 20%) on the same return, with no prior authorization.

The United States has no VAT: sales tax is set by the states and applies to retail sales. In Canada, the federal GST (goods and services tax) of 5% applies to the customs value plus duties; it is in principle recoverable by a registered business, a point to confirm with your tax advisor.

Costed example: from €9.00 (≈ $10.04) to €11.77 (≈ $13.12) per unit

The "to be confirmed" notes are conservative readings of the texts, to be confirmed with your customs broker. The customs value comes to €41,200 (≈ $46,000), or €10.30 (≈ $11.48) per unit (14% more than the factory price): that is what duties are charged on. All told, the landed cost is 31% above the factory price.

Import VAT, €8,841.60 (≈ $9,850) (20% of a base of €44,208 (≈ $49,500): customs value, duties and costs up to the warehouse; inclusion of agent fees to be confirmed), is self-assessed and does not enter the cost.

Sensitivities: a 5% rise in the dollar adds close to €0.50 (≈ $0.56) per unit. In the UK, the calculation would be similar, with VAT deferment possible. In the US, the duty base would lose at least freight and insurance (€2,120 (≈ $2,350), about 5%), but MPF, HMF and Section 301 (12.5% for most Chinese products) would be added.

The mistakes that skew a landed cost

Method: making your calculation reliable in five steps

1. Set the tariff code (Combined Nomenclature or TARIC in the EU, HTSUS in the US): it determines the rate and any measures (anti-dumping, Section 301).
2. Request quotes on the same Incoterm, with the dimensions and weight of the export carton (see which Incoterm to choose).
3. Cost each line item per shipment, then divide by the quantity: flat fees weigh heavily on small runs.
4. Add a contingency line (FX, freight, defects) rather than inflating each line item.
5. Recalculate with the actual invoices after the first order.

Several suppliers? Consolidating them into a single container reduces the share of freight and fixed costs per unit: that is the principle of multi-supplier consolidation.