Landed cost: the full formula for your delivered unit cost

Landed cost represents the sum of everything a shipment costs from leaving the Chinese factory to reaching your warehouse, brought down to a per-unit figure. It is not limited to the purchase price: it adds up transport, insurance, customs duties, clearance fees and local logistics. Without this calculation, it is impossible to set a reliable cost base, fix a solid selling price, or compare two suppliers on a fair footing.

The formula fits in one line: total landed cost = price of the goods + international freight + insurance + customs duties + forwarder and clearance fees + local transport + incidental costs. Unit cost is obtained by dividing this total by the number of units actually received compliant, not by the units ordered. Units rejected at quality control mechanically raise the cost of every sellable piece.

The same part gets quoted on different scopes. Under EXW, the factory makes the goods available at its premises and everything else falls to you: inland transport in China, export clearance, freight. Under FOB, it handles delivery, export clearance and loading on board. Under DDP, the seller goes all the way to delivery, but you lose control over the customs declaration and the declared value. Always compare on an equal footing.

The working rule is simple: ask every supplier for the same basis, generally FOB at a Chinese port, then add your own cost lines. On sourcing platforms, a low headline price often hides an EXW basis and minimum quantities. Also check what the price includes: export packaging, pallets, marking. An FOB price without compliant export packaging is not a comparable FOB.

Freight varies sharply depending on the mode chosen, the season and available market capacity. A full container is billed per container, consolidated cargo by weight or volume, with minimums that weigh on small shipments. On top of these rates come local fees at both ends: terminal handling at origin and destination, transport documents, file fees. On a consolidated shipment, these fixed items can make up a significant share of the total cost.

Cargo insurance remains optional but advisable: the premium is expressed as a percentage of the insured value and stays low against the cost of an uncovered loss. Ask your freight forwarder for a detailed quote, line by line, with a validity date, rather than a lump sum that cannot be audited. A figure several weeks old is worthless by the time you book.

The customs duty rate depends on the product's customs code, ten digits in the EU's integrated tariff (TARIC), and on its origin. The basis for calculation is the customs value: in the European Union, the price actually paid, increased by transport and insurance up to the point of entry into EU territory, under Articles 70 and 71 of the Union Customs Code (Regulation (EU) No 952/2013). Most products carry an ad valorem duty, a percentage of this basis; some carry a specific duty, per unit or per weight.

VAT follows a different logic. If you are VAT-registered, it does not weigh on the cost price: it is recoverable. In France, since 1 January 2022, import VAT is self-assessed on your return, which removes the cash-flow advance. If you are not VAT-registered, it becomes part of the real cost. Then there are anti-dumping duties: on certain product families they add to the base duty and can change the economics of a deal entirely. Check TARIC before ordering, not when the goods clear customs.

Take a hypothetical deal, purely to set out the method: 1,000 units quoted FOB at a Chinese port for €10,000, consolidated freight €1,500, insurance €100. The customs value comes to €11,600, transport and insurance to the EU border included. Assume a hypothetical duty rate of 5%: duties come to €580. VAT at 20%, the standard French rate, is calculated on the VAT-inclusive basis of €12,180, coming to €2,436, self-assessed and recovered if you are VAT-registered.

Add hypothetical forwarder and clearance fees of €300 and final delivery of €200. The total landed cost comes to €12,680, or €12.68 per unit for 1,000 compliant units. If pre-shipment inspection rejects 2% of the units, the same total is spread over 980 sellable pieces: the real unit cost rises to about €12.94. This gap widens with higher reject rates and smaller quantities.

A landed cost calculation rarely goes wrong on one big line: it is the things left out that cost you. A small item, repeated on every order, is enough to wipe out a margin. The mistakes seen in practice fit into a short list, worth rereading before every purchasing decision:

At Sorva, a sourcing and brokerage house, landed cost is built before the order, not after the boxes arrive. Our Chinese-speaking team in Guangzhou brings factory quotes onto the same scope, has freight and import costs priced line by line, checks the customs code and regulatory compliance, and has the goods inspected before loading so your unit cost is calculated on units that are actually compliant. You track every line, from the factory gate to your warehouse.

In most cases you pay no fees: you open a file, we negotiate the goods on your behalf, and we take a commission on their ex-factory value.