9 Costs That Can Affect Your Landed Cost

Landed Cost Calculation

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.

3. Delivery
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.

5. Insurance
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.

6. Handling
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.

8. Commissions
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.

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Comments

3 Responses to “9 Costs That Can Affect Your Landed Cost”

Dylan Blankenship on December 6th, 2007 8:20 am

In addition to the 9 items that will affect your landed costs, I would recommend considering two more: “unexpected exams” and “demurrage”.

These are some of the highest potentials for increasing landed costs. Demurrage is calculated at somewhere around $100 a day after the shipment has sat a port or holding facility past a particular time (10+ days). I encountered this when the original documentation for the shipment did not arrive on time to clear customs.

If you are a new importer, you are likely to be hit with US Homeland Security x-raying your container every time you import. This ranges around $400. The issue with this is if the port is busy and there is a cue then it is possible to encounter demurrage waiting for the exam. Selecting smaller ports is usually not a good idea since they have less staff to accommodate these exams (such as Savannah GA) which entail a longer wait. Also the type of crates or pallets that your product is packaged in can also spawn an FDA exam to check for bugs. They want to check even though the container has been fumigated. If you get hit with FDA and customs exams you are looking at around $1000 in costs.
(When I imported marble tile this absolutely killed my landed price - adding 13 cents to my landed price per sq ft).

Regarding ports, this can also affect your landed price. For instance, if your destination is US southeast coast then selecting Jacksonville Florida as port of entry may cost less because you eliminate the need to transport it by rail. This will also increase your ETA by two weeks sailing time.

Just my thoughts after reading your article. Very good information!

Dylan Blankenship
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