If you are a commercial importer — a company, trader, manufacturer, distributor or e-commerce seller bringing in containers to resell — the price on your supplier's invoice is not your cost. A cheap FOB unit price on 1688 or Alibaba routinely turns into a loss-making shipment once you add freight, duty, import VAT, the broker and a dozen small fees. Landed cost is the true cost of one unit sitting in your warehouse, ready to sell. Below is the correct formula, every line in it, and the components B2B importers forget most often.
What landed cost is, and why the FOB price misleads
Landed cost is the sum of every expense required to get goods from the Chinese factory gate to your warehouse and cleared through customs. The FOB or EXW price in your contract is only the first line of that total — and often not the largest. Freight, duty and import tax together can add 30–70% to the factory price, depending on the product category, weight-to-volume ratio and its HS classification.
The classic beginner mistake is calculating margin against the FOB price. Real margin is calculated against landed cost. A batch that looked profitable "at the factory" easily eats the entire markup after import — and you find out only once the goods are already in your warehouse.
The full formula: every cost line
Here is the complete list of landed-cost components. A missing line means understated cost and an overstated, paper-only margin:
- Goods price (EXW / FOB) — the invoice value on your commercial invoice. The base line everything builds on.
- China-side costs — inland transport to the port, export clearance, port and terminal charges, loading. Under EXW these are all yours; under FOB the factory has already priced them in.
- International freight — ocean (FCL/LCL), air or rail to destination. The most volatile line: it swings with season, route and lane.
- Cargo insurance — typically 0.2–0.5% of value; often ignored until a container is lost. Non-negotiable for high-value or fragile cargo.
- Import duty — a percentage of the customs value (goods + freight + insurance to the border, i.e. the CIF value). The rate depends on the HS code; many lines carry preferential rates under free-trade agreements.
- Import VAT / GST — applied to the customs value plus duty. A key nuance follows below.
- Customs broker and clearance fees — the declaration, clearance charges, conformity certificates and lab reports where required.
- Local delivery — from the port or border to your warehouse, unloading, storage.
- Financing and currency — the deposit to the factory ties up working capital; the FX movement between the payment date and the sale date is a real, often hidden line.
- Sourcing / inspection — supplier verification, quality control, and — the hidden but expensive line — the cost of defects and returns.
Landed cost is not "price plus shipping." It is a dozen lines, and every forgotten line is paid out of your margin.
The VAT nuance: a credit, not a final cost
This is where almost every competitor calculator breaks. For a registered VAT/GST payer, import VAT is not a cost — it is an input tax credit. A properly filed customs declaration lets you claim the VAT paid at the border back against your own output VAT liability in the same reporting period, so it nets out of your true product cost.
The practical takeaway: for a registered payer, VAT does not belong in the real per-unit cost — goods, freight, duty, broker and overhead do. But VAT is a cash-flow item: you pay it at customs in real money and recover it only later. So in a landed-cost model you should show VAT separately — as cash you must have today, not as final cost. For a non-registered importer it is instead a genuine, non-recoverable expense, and landed cost rises by the full VAT amount. Confusing these two scenarios is the single most common cause of wrong margin math.
Note that rates and mechanics differ by country. Ukraine's standard VAT rate is 20% and the base is customs value plus duty; the EU, MENA and African markets each apply their own import-VAT/GST rate. Treat the goods + freight + duty structure as universal, but confirm the exact rate for your destination.
Worked example: a container of steel (as of 2026, illustrative)
Take a real category — importing steel from China, a 20-foot container. The figures below are illustrative, as of 2026, to show the logic rather than a quote; confirm the duty rate against the actual HS code for steel:
- Goods FOB Tianjin: say $18,000 per container.
- Ocean freight + China-side charges to the destination port: adds several thousand dollars depending on route and season.
- Insurance: roughly 0.3% of shipment value.
- Customs value = goods + freight + insurance to the border; duty is calculated on this (rate per the HS code).
- Duty + broker + clearance + local delivery to the warehouse.
- Import VAT on (customs value + duty) — paid at customs, recovered as a credit for a registered payer.
Add the first lines (excluding the recoverable VAT), divide by the number of tonnes, and you get the real per-tonne cost in the warehouse. It is almost always 25–50% higher than the FOB price. Your selling price is built on that figure, not the factory one. For how the customs payments themselves are calculated, see clearing a commercial shipment; for how the lines split by delivery term, see the Incoterms 2020 guide.
How Incoterms shift the components
The Incoterm you choose does not change the total landed cost — it changes who pays which line. Under EXW you pay for inland transport within China, export clearance and port charges yourself, so those lines appear in your side of the calculation. Under FOB the factory has already built them into the goods price, so the China-side line is near-empty but the freight is yours. Under CIF the seller has paid freight and insurance too, but the mandatory cover is minimal and the risk still transfers to you once the goods are on board. That is why you cannot compare offers head-to-head on unit price alone: first reduce them to one common point — landed cost at your warehouse. The full split is in the Incoterms 2020 guide.
Why the cheapest unit price is not the lowest landed cost
The cheapest unit price routinely produces the highest total landed cost. Here is why: a cheaper supplier delivers defects more often, and the cost of defects, returns and claims is also a landed-cost line — it just surfaces later. A cheap factory may ship mis-declared goods, and you pay the difference at customs or eat a delay. Saving $500 on the batch price easily becomes $2,000 lost to defects and container demurrage.
That is why an experienced importer optimises the whole landed cost, not one line. This is the difference between a freight forwarder and a full-cycle sourcing partner: a carrier moves the box from port to port, while a sourcing partner controls classification, documents, quality control and the cost structure end to end — so that a cheaper factory price does not eat your margin at clearance and in defects.
Who models your landed cost end to end
Silk Way Sourcing is a full-cycle company: sourcing and supplier verification, production and QC, logistics and customs clearance. We build every cost line into one model before you pay the deposit — so you see the real per-unit warehouse cost, not the FOB illusion. In 7 years (since 2019): over 3,500 delivered shipments and 340+ verified factories.
Want the exact number for your batch? Email contact@silkwaysourcing.com or message WhatsApp +380 97 883 4765 — we will calculate the full landed cost of your batch, broken down line by line.
