How to calculate landed cost for imported goods

Landed cost is the total cost of getting a product to your door. It is the number your margin should be measured against, not the supplier’s invoice price.

The formula

Landed cost per unit = item cost + freight + insurance + duty + customs brokerage, plus any fees that apply to your shipments. For US imports that includes the merchandise processing fee and, for goods that arrive by sea, the harbor maintenance fee (see MPF and HMF).

An example

Knitted cotton T-shirts from China into the United States. These are example figures:

• Item cost: $4.00
• Freight: $0.50
• Insurance: $0.04
• Duty: 16.5% of $4.00 = $0.66 (the general rate for HTS 6109.10)
• Customs brokerage: $0.20
• Landed cost: $5.40

Sold at $19.99, the gross profit is $14.59, a margin of 73.0%.

Step by step

1. Take the item cost per unit from the supplier’s invoice, in the currency you will pay it in, and convert it to the currency you sell in.
2. Spread the shipment’s freight, insurance and brokerage across the units in it, by value, by quantity or by weight.
3. Find the product’s HS code and the country it was made in (not the country it was shipped from).
4. Look up the duty rate for that code and origin in the official schedule. Check whether a trade agreement gives a lower rate, and whether your goods really qualify for it.
5. Add any extra tariffs that apply to your product and origin. They are not in the base rate (see Section 301 and other extra tariffs).
6. Add it all up, then work out the margin at the price you charge.

Which costs the duty is charged on

In both the US and Canada, duty is generally charged on the value of the goods, which does not include international freight and insurance. Some costs, such as certain royalties or materials you supply to the factory, can add to the dutiable value, and the rules differ in the details between the two countries. If you are unsure, ask your customs broker.

Margin and markup are different

Margin is the share of the selling price you keep: (price − landed cost) ÷ price. Markup is the profit as a share of what the product cost you: (price − landed cost) ÷ landed cost. The same product above has a 73.0% margin and a 270% markup. Compare margin with margin.

Why a landed cost goes out of date

Duty rates change, extra tariffs are added and removed, freight rates move, exchange rates move, and the US customs fees are adjusted every October. A landed cost worked out last quarter is an estimate of the past. That is the reason Marginify keeps it current and tells you when a change touches a product you sell.

Try one product in the free calculator, with no account.