9 Costs That Can Affect Your Landed Cost
Importing product internationally has it's challenges but the rewards and profits can be sweet! Your attention to detail when calculating all the costs involved can make or break your profit potential. The larger your quantity the less these extra costs will affect your per unit cost. Here are the top 9 costs to watch out for when calculating your final landed cost.
1. Invoice price
Assuming the factory is quoting you an FOB cost, your invoice price will only include the cost of the products from the factory and may not include the costs listed below.
2. Shipping Costs
Depending on whether you choose air freight or sea freight will be a determining factor when calculating your shipping costs. Sea freight will likely be much cheaper but will also take longer. International air freight can be quite expensive but is sometimes necessary depending on your time to market commitments.
Particularly with sea freight, delivery from the port of entry to your final destination is sometimes an overlooked cost for new importers. While it is usually possible to pick up product yourself from the port of entry, there are also many "last mile" providers that deliver to yoru final destination.
4. Import Taxes (Duties)
You'll need to calculate and pay appropriate duty costs on your items by classifying your product with an HTS code. Depending on the type of product, duties can add significantly to your landed cost.
As with standard domestic shipping, various insurance options are available to choose from, typically costing more depending on the amount you'll need to insure against.
Ports and other parties that "touch" your cargo en route may charge a handling or processing fee.
7. Banking Fees
Banks typically charge fees for financial services provided inlcuding outgoing and possibly incoming wire transfer fees, letter of credit fees etc.
If you've used a trading company or other intermediary parties, they may choose a flat cost or % commission that you'll need to include in your landed cost calculations.
9. Consulting Fees
Have you used third party providers for quality assurance or other services? These costs should also be included in your landed cost calculations.