Landed cost is the total cost of a product once it is in your warehouse and available to sell. It includes the supplier's price, freight, insurance, duty, import taxes, terminal and handling charges, brokerage fees and inland delivery. Buyers who compare suppliers on unit price alone are comparing the smallest component of the figure that decides whether the purchase is profitable. A landed-cost model built per SKU, before the order is placed, removes most of the unpleasant surprises that arrive with the clearance invoice.
Duty is not calculated on what you paid the supplier. It is calculated on the customs value, which in most jurisdictions starts from the transaction value of the goods and is then adjusted upward or downward according to national rules. The critical distinction is whether your destination assesses duty on a CIF basis, which includes international freight and insurance in the dutiable value, or on an FOB basis, which excludes them. The same shipment therefore attracts different duty depending on where it lands. Customs authorities may also require additions to the value for items that are easy to overlook: tooling or moulds supplied free of charge to the factory, design work carried out outside the importing country, and royalties or licence fees paid as a condition of sale.
The duty rate itself comes from the HS classification. That rate is the standard, or most-favoured-nation, rate. A preferential rate may apply where a free trade agreement exists between the origin and destination, but only if you hold valid proof of origin in the form the agreement requires, and only if the goods satisfy that agreement's origin rules. Preference is claimed, not granted automatically. Separately, some goods carry additional duties that sit on top of the tariff rate, including anti-dumping and countervailing duties, which are imposed by product and by country of origin and can be substantially larger than the base rate. These are applied to the goods, not to the importer, so being a first-time buyer offers no protection from them.
Import taxes follow duty, and the order matters. VAT, GST or an equivalent consumption tax is generally calculated on the customs value plus duty, and often plus freight and insurance as well. Duty therefore compounds into the tax base rather than sitting beside it. The practical consequence for cash flow is that the two behave very differently on your accounts: for a registered business, import VAT or GST is usually recoverable as input tax, while duty is a permanent cost that belongs in your margin calculation. Treating them as a single number overstates your true cost and understates the working capital you need at the point of clearance.
The remainder of landed cost is the operational layer, and it is where estimates most often drift. Origin charges, ocean or air freight, destination terminal handling, customs brokerage, any inspection or testing fees, delivery order charges and inland transport all belong in the model. So do the costs that only appear when something goes wrong, principally demurrage and detention, which accrue daily once free time expires and are the most common reason a well-priced shipment becomes an expensive one. Currency movement between order and payment deserves a line of its own on long lead-time purchases.
The most useful thing you can do before committing to an order is to confirm the HS code, confirm the duty and tax treatment in the destination country, and confirm the Incoterm, because that Incoterm decides which of these costs are already inside the supplier's price and which are still yours. Customs clearance and brokerage is one of our service lines, and we can work through the duty and tax position for a specific product and destination with you. Send us the product description, the HS code if you have one, and the destination country, and we will come back within one business day.
