Landed cost calculation
Landed cost is the total cost of acquiring goods and delivering them to the buyer's premises, inclusive of all charges incurred along the supply chain. It is the correct basis for margin analysis — using FOB or CIF price alone understates true acquisition cost and can make profitable-looking trades unprofitable.
The landed cost formula
Landed cost =
FOB price
+ International freight
+ Marine / cargo insurance
+ Customs duty
+ Import VAT / GST
+ Customs broker fees
+ Port and terminal handling charges
+ Last-mile delivery to buyer's premises
Additional variable charges — anti-dumping duties, excise duties, regulatory compliance fees, or storage costs — are added as applicable.
CIF vs FOB basis for duty calculation
Most countries, including the EU, UK, Canada, Australia, and most of Asia, calculate customs duty on the CIF value — the cost of the goods plus international freight and insurance to the port of entry. This means the duty base is higher than the goods value alone.
The United States is the principal exception: US customs duty is assessed on the FOB value — the price of goods at the point of export, excluding international freight and insurance. For high-value air freight shipments, this can produce a meaningfully different duty liability.
When calculating duty, always confirm which basis the destination country uses. For a shipment with 10% international freight, a CIF-basis country will assess duty on roughly 10% more value than a FOB-basis country, even if the goods price is identical.
Worked example: USD 5,000 of electronics, China to UK
Exchange rate: USD 1 = GBP 0.792 (illustrative). Goods: consumer electronics classified under HS 8471.30 (laptops/tablets). UK MFN duty rate: 0%. UK import VAT: 20%.
| Cost element | Notes | USD | GBP |
|---|---|---|---|
| FOB price (electronics, China) | Agreed export price from Chinese supplier | USD 5,000 | GBP 3,960 |
| International sea freight | FCL 20ft, Shanghai to Felixstowe | USD 520 | GBP 412 |
| Marine insurance | 0.3% of CIF value (approx.) | USD 17 | GBP 13 |
| CIF value (duty basis) | FOB + freight + insurance | USD 5,537 | GBP 4,385 |
| Customs duty (UK, HS 8471.30) | 0% MFN rate (laptops/tablets) | USD 0 | GBP 0 |
| UK import VAT (20%) | Applied to CIF + duty | USD 1,107 | GBP 877 |
| Customs broker entry fee | Per-entry filing, HMRC CDS | USD 190 | GBP 150 |
| Port handling and THC | Terminal handling at Felixstowe | USD 240 | GBP 190 |
| Last-mile delivery (to warehouse) | Road haulage, Felixstowe to London | USD 380 | GBP 301 |
| Total landed cost | All charges to buyer's door | USD 7,454 | GBP 5,901 |
The effective landed cost uplift is 49% above FOB price — primarily driven by VAT (reclaimed by VAT-registered businesses) and freight. For a business that cannot reclaim import VAT, the uplift is 49%. For a VAT-registered importer, the effective non-reclaimable uplift is approximately 26%.
Common hidden costs
Demurrage
Daily charge levied by shipping lines if a container is not collected from the port within the free-time period (typically 3–5 days). Can reach USD 150–300 per day and accumulates rapidly during port congestion.
Container storage / detention
Port storage fees if goods are not cleared within free days. Distinct from demurrage: detention applies when an empty container is not returned to the line after unpacking.
Physical examination fees
When customs orders a physical inspection, the importer pays examination fees, stuffing/unstuffing charges, and re-sealing costs. US examination fees range from USD 200 to several thousand dollars depending on examination type.
Anti-dumping surcharge
Goods covered by an anti-dumping or countervailing duty order attract an additional duty on top of the standard rate, often 25–100%+ of customs value. Must be checked by HS code and country of origin before importing.
Customs examination bond
Some customs authorities require a bond or deposit to release goods pending examination results. The deposit is returned if examination clears, but it ties up working capital.
Document preparation fees
Certificate of origin issuance, legalization, apostille, and consular invoice fees vary by country and can add USD 50–400 per shipment.
Use the Duty Calculator to look up the customs duty rate for a specific HS code and destination country, and factor it into your landed cost model.