The price on your supplier's invoice is only the opening number. By the time a product clears customs, rides a truck inland, and reaches a warehouse shelf, it has picked up freight, duties, fees, and insurance that push its true cost well above the factory quote. That all-in figure is the landed cost, and it decides whether each unit you sell actually makes money. Below, we cover what it includes, the formula, a worked example, and practical ways to bring it down.
To define landed cost in one line: it's the total price of a product once it reaches its destination, including every expense along the way. The International Trade Administration calls it "the total price of a product once it has arrived at the buyer's doorstep."
Both of the above represent the textbook landed cost definition. In day-to-day practice, estimated landed cost is the number to use for pricing, margins, and supplier comparisons. You'll also see it called the landed price, landed cost price, total landing cost, or simply landing cost.
๐ Note: Landed cost isn't the same as cost of goods sold (COGS). Landed cost is a per-unit figure you calculate before you sell; COGS is an accounting total for inventory already sold. The two terms are correlated, though, because landed cost feeds directly into COGS.
Most charges fall into six buckets:
|
Component |
What It Includes |
|---|---|
|
Product Cost |
Supplier price, currency conversion, payment fees |
|
Freight |
Ocean, air, or truck transport, port charges, drayage |
|
Duties & Tariffs |
A percentage of customs value, set by HTS code and origin |
|
Customs Fees |
Merchandise Processing Fee, Harbor Maintenance Fee, broker fees |
|
Insurance |
Cargo coverage against loss, theft, or damage |
|
Handling |
Inbound receiving, inspection, and storage |
US trade policy has shifted repeatedly since 2025; Yale Budget Lab's tariff tracker put the average US statutory tariff rate at 11.0% in August 2026.
Low-value parcels aren't a safe harbor anymore, either. US duty-free de minimis treatment for shipments of $800 or less was suspended for all countries on August 29, 2025.
The landed cost formula is additive:
โก๏ธ Landed cost = product cost + freight + duties and taxes + customs and broker fees + insurance + handling
Divide the total landed cost by the number of units to get a per-unit figure. Many importers also track a landed cost factor: the total divided by product cost. A factor of 1.41 means every $1.00 paid to the supplier really costs $1.41 on the shelf. Tracked by SKU and supplier, it shows quickly where margin is leaking.
Here's how to calculate landed cost step by step:
A US home-goods brand imports 2,000 insulated water bottles from Vietnam at $6.00 FOB Ho Chi Minh City. They move by ocean (LCL) to Long Beach, then by truck to a fulfillment center in Salt Lake City. We'll assume an illustrative 20% combined duty rate; always confirm yours in the HTS.
|
Line Item |
Landed Cost Calculation |
Cost |
|---|---|---|
|
Product (FOB) |
2,000 ร $6.00 |
$12,000.00 |
|
Ocean Freight & Port Charges |
Forwarder quote |
$1,400.00 |
|
Cargo Insurance |
Policy quote |
$90.00 |
|
Customs Duty |
$12,000 ร 20% |
$2,400.00 |
|
Merchandise Processing Fee |
$12,000 ร 0.3464% |
$41.57 |
|
Harbor Maintenance Fee |
$12,000 ร 0.125% |
$15.00 |
|
Customs Broker Fee |
Flat entry fee |
$175.00 |
|
Inland Freight To Warehouse |
Carrier quote |
$650.00 |
|
Inbound Receiving |
3PL rate |
$120.00 |
|
Total |
$16,891.57 |
|
|
Per Unit |
$16,891.57 รท 2,000 |
$8.45 |
The bottle that cost $6.00 at the factory actually costs $8.45 on the shelf, a factor of 1.41. At a $24.99 retail price, gross margin looks like 76% against FOB but is closer to 66% against the real number. That 10-point gap is where underpriced products lose money.
Calculate Your Own Landed Cost
FOB vs. landed cost comes down to where the price stops. FOB (Free on Board) is one of the eleven Incoterms rules published by the International Chamber of Commerce: the seller covers costs until goods are loaded onto the vessel at origin, and everything after that belongs to the buyer.
|
Factor |
FOB Price |
Landed Cost |
|---|---|---|
|
Where The Cost Stops |
Loaded on the vessel at origin |
Received at your warehouse |
|
Freight & Insurance |
Not included |
Included |
|
Duties & Customs Fees |
Not included |
Included |
|
Best Used For |
Comparing supplier quotes |
Pricing, margins, inventory valuation |
FOB quotes help you compare suppliers on equal terms, but only the delivered figure shows what a product really costs. A lower FOB price can still lose once a higher duty rate, longer transit, or pricier port is factored in.
Some components are fixed by law. Others respond to better planning:
๐ก Two of our health and wellness supplement shippers, Ocean Organics & Juvenon, ship from both our fulfillment centers. This decision makes them eligible to save over $100,000 a year after moving to TFL's dual-warehouse setup.
Getting product onto the shelf is half the equation. Storage, picking, packing, and outbound shipping decide whether that margin survives to the customer's door.
The Fulfillment Lab gives growing brands two U.S. warehouses in Tampa and Salt Lake City, an international partner network reaching 180+ countries, and fulfillment software with real-time inventory and transparent billing. No hidden fees, so you always know what you're paying and why. Compare the numbers in our 3PL pricing breakdown, or explore our full 3PL services.
Free import cost tool
See what each imported unit really costs once it reaches your warehouse shelf. Work through the six steps below and your estimate updates as you type.
Convert your supplier invoice to US dollars at the rate on your payment date.
Price per unit on the supplier invoice
Use the rate on your payment date.
Wire, currency exchange, or card fees on the supplier payment
The Federal Reserve's H.10 foreign exchange release is a reliable exchange rate reference.
Add every charge from origin pickup to your warehouse door.
Customs value multiplied by the HTS rate for your product and country of origin.
Leave blank to use your product value. US customs value is usually the price paid to the supplier, excluding international freight and insurance.
Look up your code in the Harmonized Tariff Schedule
Section 301, 232, or other duties stacked on the base rate
MPF, HMF on ocean shipments, and your broker's entry fee.
ISF filing, customs bond, or exam fees
Cargo coverage plus what it takes to get stock received and shelf-ready.
Policy premium for this shipment
Your 3PL's inbound receiving charge
Inspection, relabeling, or storage before the first sale
Divide the total by the units you actually received.
Count only sellable units; leave blank if it matches your order
Add your retail price to compare margins
Landed cost per unit
$0.00
Enter your product cost and units to see your estimate.
| Component | Total | Per unit |
|---|
Margin check
Your margin doesn't stop at the warehouse door
Storage, pick and pack, and outbound shipping decide how much of it you keep. The Fulfillment Lab pairs two U.S. fulfillment centers with an international partner network and transparent billing, so you always know what you're paying and why.
Book A Call With UsIt's everything you pay to get a product from your supplier onto your warehouse shelf: the purchase price plus freight, duties, customs fees, insurance, and handling. Divide that total by units received to find your true per-unit cost.
Yes. Import duties, tariffs, and customs fees such as the Merchandise Processing Fee are all included. Sales tax charged to your end customer isn't, because it's collected at checkout and remitted to the state, not paid to acquire inventory.
Generally no. Since the US suspended de minimis treatment in August 2025, even low-value imports can carry duties and clearance fees. Run the same formula per order, swapping ocean freight for postage, and build those charges into every parcel's cost.
The importer of record pays duties and customs fees, while the Incoterm in your purchase contract decides who pays freight and insurance. Under FOB, the buyer covers everything after loading; under DDP, the seller covers everything to the destination.