How to Calculate Landed Cost When Importing from China

The price on a supplier's quote is only the first line of your real cost. Freight, duty, fees and delivery can add a large share on top, and they vary by product, route and destination country. This guide breaks landed cost into its parts, explains how customs value is calculated in the US versus the EU and UK, and works through an example with clearly hypothetical numbers.

The landed cost formula#

Landed cost is every cost you pay to get goods into your warehouse and ready to sell, divided by the number of sellable units. Written out:

Landed cost = product cost + China-side costs + international freight + insurance + import duty + customs fees + brokerage + destination charges + final delivery + non-recoverable VAT/GST

Landed cost per unit = total landed cost ÷ units received

Use units received, not units ordered. If you expect a percentage of defects or shortages, divide by the good units only.

Step 1: Product cost and China-side costs#

Start with the unit price times quantity, then add anything the quote leaves out. What that is depends on the Incoterm.

• EXW: you pay loading, trucking to the port or consolidation warehouse, export customs clearance and origin terminal charges.
• FOB: the supplier covers these up to loading on the vessel at the named Chinese port.
• Other items to include: tooling or mold fees, custom packaging, sample costs, third-party inspection, and bank charges on your payment.

For how the main terms split costs, see EXW vs FOB vs DDP.

Step 2: International freight and insurance#

Freight is the cost of moving the goods from China to your country, by sea, air, rail or express. Get a written quote from your forwarder that separates origin charges, main freight and destination charges, so you can see which costs fall before and after the border.

Cargo insurance is usually quoted as a small percentage of the insured value. Even if you don't buy it, you need to know whether an insurance amount belongs in the customs value (it does in the EU and UK when insurance is paid).

For choosing the mode, see sea vs air vs rail vs express.

Step 3: Import duty and the customs value basis#

Import duty is normally a percentage of the goods' customs value, at a rate set by the product's tariff classification. Two things decide the amount: the correct HS code and the value it is applied to. Get the code right first; our guide on how to find your HS code explains the process.

The value base is where countries differ:

The US rule comes from CBP's customs value guidance, which says the price actually paid or payable excludes international freight, insurance and other C.I.F. charges. The EU rule is set out in the European Commission's customs valuation summary, and HMRC's guidance on delivery costs sets out the UK rule. If a CIF or DDP invoice bundles freight into the price, you or your broker need the freight shown separately so the right amount can be included or deducted.

For US imports, also check whether your product carries additional duties on Chinese-origin goods, such as Section 301 duties, on top of the general rate. These change often, so confirm the current rate for your HS code with your broker at the time of entry.

Step 4: Customs fees, VAT and GST#

Beyond duty, most countries charge processing fees or import taxes, and they are calculated differently from duty.

United States. There is no federal import VAT, but two fees commonly apply on formal entries:

• Merchandise Processing Fee (MPF): 0.3464% of the value. For fiscal year 2027, starting October 1, 2026, CBP has set the minimum at $34.58 and the maximum at $670.86 per formal entry.
• Harbor Maintenance Fee (HMF): 0.125% of the cargo value for goods arriving by ocean.

EU and UK. Import VAT is charged on a wider base than duty. In the EU, the taxable amount is the customs value plus customs duties and other import taxes, plus incidental costs up to the place of destination. HMRC's UK guidance works the same way: customs value plus duty, plus incidental expenses such as transport, insurance and clearance charges up to the goods' first destination in the UK. VAT rates vary by EU member state.

If you are VAT-registered, import VAT can usually be reclaimed, so it is a cash-flow cost rather than a product cost. If you cannot reclaim it, include it in landed cost.

Step 5: Brokerage, destination charges and delivery#

The last costs appear after the goods arrive and are easy to underestimate.

• Customs brokerage: the fee for filing your import entry, often with extra charges per HS code line or for bonds.
• Destination charges: terminal handling, delivery orders, documentation fees and, for LCL, deconsolidation at the destination warehouse.
• Final delivery: trucking from the port or airport to your warehouse or fulfillment center.
• Risk items: storage or demurrage if clearance is delayed, and exam fees if customs inspects the shipment.

Worked example (hypothetical numbers)#

The figures below are invented to show the method. They are not real freight quotes or duty rates for any product.

Assume 1,000 units at $8.00 FOB Ningbo, $600 ocean freight, $40 insurance, a hypothetical 5% duty rate, $150 brokerage, $250 destination charges and $300 trucking. For the UK/EU column, a hypothetical 20% VAT rate is used and all amounts are kept in USD for comparison.

Two lessons stand out. The same 5% rate produced $32 more duty in the UK/EU because freight and insurance were in the base. And the "cheap" $8.00 unit actually cost about $9.78 landed, roughly 22% more than the quote. With a higher duty rate, additional tariffs or air freight, the gap grows quickly.

Keep your landed cost model up to date#

A landed cost sheet is only as good as its inputs. Rebuild it for every new product and refresh it at least when one of these changes:

1. Freight rates, which can move sharply between quotes.
2. Duty rates or additional tariffs on your HS code.
3. Fee schedules, such as the annual US MPF adjustment each October 1.
4. Exchange rates between your currency, USD and CNY.
5. Order size, since fixed costs like brokerage and minimum fees weigh more on small shipments.

Building the sheet before you place an order, not after the goods arrive, is what lets you set a price that still leaves a margin.