Landed Cost

Landed cost is the total price of a product once it has arrived at the buyer’s door or warehouse, encompassing every expense incurred from the point of manufacture to final delivery. It goes well beyond the supplier’s invoice price and includes freight, customs duties, taxes, insurance, handling fees, currency conversion costs, and any other charges accumulated during transit. For e-commerce sellers, particularly those selling on Amazon FBA, calculating landed cost accurately is the foundation of profitable product sourcing and pricing.

Components of Landed Cost

Product cost (FOB or EXW price): The price the manufacturer or supplier charges for the goods. This is typically quoted per unit or per carton. Sellers sourcing from China will usually see an FOB price that includes the supplier’s cost to deliver goods to the port of export.

International freight: The cost to move goods from the origin country to the destination. For ocean freight, this includes the container rate (or LCL rate for smaller shipments), origin handling charges, documentation fees, and ocean carrier surcharges (BAF, PSS, peak season surcharges). For air freight, it includes the per-kilogram rate plus fuel surcharges, security fees, and terminal handling at both ends. A 40-foot container from Shenzhen to Long Beach might cost $2,800 to $6,000 depending on the market, while the same volume by air could run $18,000 to $30,000.

Customs duties and tariffs: U.S. import duties are assessed based on the product’s HTS (Harmonized Tariff Schedule) classification and the declared value. Duty rates vary enormously: some products enter duty-free, while others face rates of 5% to 25% or higher. Section 301 tariffs on Chinese-origin goods add an additional 7.5% to 25% on affected product categories. A product with a 10% base duty rate and a 25% Section 301 tariff faces a combined 35% duty on its declared value.

Customs brokerage: The fee paid to a licensed customs broker to file the entry with U.S. Customs and Border Protection (CBP). Standard brokerage fees range from $125 to $250 per entry for routine shipments, with additional charges for ISF filing ($25 to $50), bond usage, and any exam fees if CBP selects the shipment for inspection.

Insurance: Marine cargo insurance, typically 0.15% to 0.50% of cargo value. Some sellers skip insurance to save money, but the risk exposure from a container loss, damage event, or general average declaration far outweighs the premium.

Domestic freight: The cost to move goods from the port to the final destination. Drayage from the port to a nearby warehouse might cost $250 to $600 per container in the Long Beach area. If the goods then need to travel to a prep center or Amazon fulfillment center in another region, trucking (LTL or FTL) adds further cost.

Prep and handling: Costs for inspection, labeling, poly bagging, bundling, and creating FBA inbound shipments. At a prep center like MeisterPrep, per-unit prep fees typically range from $0.80 to $2.50 depending on the service scope.

Miscellaneous charges: Port congestion surcharges, chassis rental fees, container detention and demurrage, fumigation certificates, and warehouse receiving fees. These smaller line items collectively add 3% to 8% on top of the base freight cost and are frequently overlooked in initial calculations.

Calculating Landed Cost Per Unit

The formula is straightforward: sum all costs from factory to warehouse, then divide by the total number of units received. For example, a shipment of 5,000 units with a product cost of $3.00 per unit, $3,200 in ocean freight, $7,500 in duties, $175 in brokerage, $75 in insurance, $450 in drayage, $400 in domestic trucking, and $1.00 per unit in prep ($5,000 total) yields a total cost of $26,800, or $5.36 per unit landed.

That $5.36 landed cost is the number that matters for pricing decisions, not the $3.00 factory price. Sellers who price based on product cost alone consistently underprice their goods and wonder why their margins are thin or negative.

Using Landed Cost for Pricing Decisions

Once you have an accurate landed cost, work backward from your target selling price. If a product sells for $24.99 on Amazon and FBA fees total $7.50 (fulfillment, referral, storage), the available margin is $24.99 minus $7.50 minus $5.36 = $12.13 before advertising and overhead. If PPC costs average $3.00 per unit sold, the net margin drops to $9.13, or roughly 36.5%.

Running this calculation before placing a purchase order prevents the common mistake of committing to a product that looks profitable at the factory price but breaks even (or loses money) after all costs are included. Track landed cost per SKU over time, because freight rates, duty rates, and exchange rates shift, and a product that was profitable six months ago may need a price adjustment or supplier renegotiation to remain viable.