Margin and Selling Price of an Imported Product: The Full Calculation

Two products quoted at the same FOB price never end up costing the same in Europe. One is heavy, the other fits in a small case; one falls under a taxed tariff line, the other under a low-duty line. Between ex-factory and your customer come transport, insurance, customs duties, VAT, freight forwarder fees and the last mile. Judging a quote on the factory price alone is like reading an invoice while only looking at the first line.

This mistake is common on a first import. The margin is calculated on the proforma price, then freight, customs and delivery eat away part of the expected profit. At Sorva, no order ships before the full landed cost is set down in writing, unit by unit. This spreadsheet then becomes the reference for every reorder.

The full landed cost, professionals' landed cost, is built on a spreadsheet, item by item, from ex-factory to the end customer. Work per unit: a container always comes down to a price per piece sold. Update the lines after every actual shipment, since freight and exchange rates vary. The items to include:

The Incoterm on the proforma determines which lines you actually carry. An EXW price stops at ex-factory: everything else is on you. An FOB price includes inland transport and Chinese export clearance, but not the sea crossing. A DDP price, delivered duty paid, in principle covers transport, duties and VAT, but the factory bakes them into its price, with no visibility for you. Always ask for the breakdown.

Customs duties are calculated on the customs value, defined by Regulation (EU) No 952/2013, the Union Customs Code. This value in principle corresponds to the price actually paid, increased by transport and insurance to the EU border. The applicable rate depends on the HS code: the European Commission's TARIC database publishes it freely. On most manufactured products, it sits between zero and around ten percent, but certain categories carry anti-dumping duties running into tens of percent. Check both before ordering.

VAT is then added on a base that includes the customs value plus duties. In mainland France, the standard rate reaches 20%, with reduced rates for certain categories. For a taxable business holding a French VAT number, this VAT has, since 1 January 2022, been subject to a reverse charge: declared and then deducted on the same return. It is therefore not a final cost, but it must be provisioned, since it passes through your cash flow.

The principle comes down to one formula: selling price excluding tax equals full landed cost multiplied by a markup factor. A factor of 2 doubles the cost, a factor of 3 triples it. The difficulty is deciding what the factor must cover: logistics after customs clearance, distribution, sales commissions, marketing, after-sales service, and profit. Each must be listed, otherwise the factor funds them with thin air.

The right level depends on the sales channel, not on a rule of thumb for the sector. Wholesale to a distributor and direct sale carry neither the same costs nor the same volume. The classic trap is setting the factor on the factory price alone: the calculation looks comfortable, then freight, customs and delivery scrape away the margin. Always set the factor on the full landed cost, and document what each level covers.

None of these alone sinks a project, but added up they cost several points of margin. They are missing from the first calculation because they arrive after the order, once the selling price is already set.

The check happens in three stages. First the full landed cost, per unit, with freight quoted, not guessed. Then the market price: what the product actually sells for in your channel, discounts included. Finally the comparison: if the margin does not hold, the product is renegotiated, redesigned, changes Incoterm, or does not ship. Dropping a reference before ordering it costs an analysis; finding out afterwards costs a container.

Redo the exercise at every reorder: freight, exchange rates and duty rates move, and a price valid for one quarter is not always valid the next. After each shipment, feed the actual costs back into the spreadsheet, then correct the gap, through the purchase price or the selling price.

Sorva is a brokerage and sourcing house active between Europe and China. On every file, our Chinese-speaking team in Guangzhou has your product quoted by several factories on an identical basis, negotiates the ex-factory price and checks compliance before payment. On the Europe side, we build the full landed cost with your freight forwarder, from freight to VAT, through to the recommended selling price.

In most cases, you pay no fees: you open a file, we negotiate the goods for you, and we take a volume-based commission, calculated on the ex-factory value of the purchases made. Our interest follows yours: a product that sells, with a margin that holds after customs clearance.