Landed Cost per Unit: The True Cost of Imported Inventory

When you import products to resell, the price on the supplier's invoice is the easy part. By the time the goods are on your shelf you have also paid for international freight, insurance, import duties, a customs broker and local delivery. The total, divided by the number of units, is your landed cost per unit – and it is the only number your prices and margins should be based on.

The landed cost formula

Landed cost = product cost + shipping + insurance + duties and taxes + customs and broker fees + payment and handling costs

Divide by the number of sellable units and you get the landed cost per unit. Each component is easy to understand on its own; the problem is that sellers often forget one or two of them.

A worked example

A small online store orders 500 units at $8.00 each from an overseas supplier. These are the costs that arrive over the following weeks:

Landed cost per unit: $5,255 ÷ 500 = $10.51. That is 31% more than the $8.00 supplier price.

What it does to your margin

Suppose you sell the product for $18.00. Calculated on the supplier price, the gross margin looks like ($18 − $8) ÷ $18 = 55.6%. Calculated on the real landed cost it is ($18 − $10.51) ÷ $18 = 41.6%. Fourteen points of margin disappeared before paying for marketing, platform fees or returns. If your pricing assumed the higher number, you may be losing money on every order without noticing. Our article on markup vs margin explains why that difference matters for pricing.

Duties: check which value they apply to

Import duty is a percentage of the "customs value", and countries define that value differently. The United States generally applies duty to the transaction value of the goods without international freight (an FOB basis), while the European Union and many Latin American countries use the CIF value – product plus freight plus insurance. In this example, on a CIF basis the duty would be 6.5% of $4,690 = $304.85, and the landed cost per unit rises to $10.60. On top of duty, many countries charge VAT or sales tax on import; if you can recover it as a registered business, keep it out of landed cost, otherwise include it.

Allocating shared costs across different products

When one shipment contains several products, freight and fees have to be split between them. Three common methods:

• By units – simplest, fine when products are similar in size and value.
• By value – each product carries costs in proportion to its share of the invoice; good for insurance and duties.
• By weight or volume – the most accurate for freight, because carriers charge for space and weight. Our sister site SwiftConvertHub explains how couriers calculate dimensional weight.

Many importers combine them: freight by volume, duties and insurance by value.

Ways to lower landed cost

• Order larger quantities so fixed costs (broker fee, bank transfer, minimum freight charges) are spread across more units.
• Compare Incoterms. A slightly higher FOB price may still be cheaper than an EXW price once you add pickup and export clearance at origin.
• Check the tariff classification. The HS code determines the duty rate; a correct classification can change the rate significantly.
• Consolidate shipments instead of paying several small, expensive air shipments.

Once you know your landed cost per unit, test your selling price in the profit margin calculator. To compare cartons or bulky products by price per cubic unit, use the cost per unit volume calculator.