Silk Bridge Journal

Definition

 Landed Cost is the total cost of bringing a product from the manufacturer to a specific location on the importer’s side, most commonly the importer’s warehouse. It is significantly more than the purchase price of the goods alone.

Depending on how the import is organized, Landed Cost may include the product price, international transportation, insurance, customs duty, VAT, port charges, customs clearance, domestic transportation, warehousing and other costs associated with delivering the goods.

For this reason, the price quoted by the manufacturer should not be treated as the actual cost of the product for the importer.

Why Should Importers Know This?

 Knowing the Landed Cost is essential for correctly assessing the profitability of an import. A product may cost USD 10 at the factory, but its actual cost after delivery to the warehouse may be significantly higher.

Without taking all additional costs into account, an importer may incorrectly calculate the margin, set the selling price too low, or decide to import a product that is not actually profitable enough.

Landed Cost also makes it possible to compare offers from manufacturers in different countries more objectively. A manufacturer offering a lower factory price will not necessarily be cheaper once transportation, duties and other costs are taken into account.

Related Terms

 FOB · CIF · DDP · Duty · Freight Forwarder · HS Code · Demurrage

In Practice

When calculating the product price, the importer should take into account not only the purchase price from the manufacturer, but also all costs associated with delivering the goods to their own warehouse. When comparing suppliers, it is worth comparing their offers based on the total Landed Cost rather than the factory price alone.