Landed cost is the total cost of getting an imported product from the supplier's facility to your warehouse or distribution center. It includes the purchase price, international freight, cargo insurance, customs duties, taxes and fees, customs broker charges, and domestic handling or delivery costs. Landed cost represents the true cost basis for pricing decisions and margin analysis.
Why It Matters for Importers
Many importers make pricing decisions based on the purchase price alone, then discover that duties, freight, and fees erode their margins significantly. A product with a 20% duty rate, ocean freight costs, and broker fees can have a landed cost 30-50% higher than the factory price. Without calculating landed cost accurately before placing an order, you risk selling at margins far thinner than projected — or at a loss.
Landed cost also determines whether sourcing from a particular country or supplier is actually competitive. A lower factory price from one country may produce a higher landed cost than a more expensive supplier in a country with duty-free access under a trade agreement like USMCA.
Components of Landed Cost
- Product cost: The purchase price on the commercial invoice, typically in the agreed Incoterm.
- International freight: Ocean, air, or ground transportation from the supplier to the U.S. port of entry.
- Cargo insurance: Coverage for loss or damage during transit.
- Customs duties: Tariffs assessed by CBP based on the HTS classification and customs value.
- Merchandise Processing Fee (MPF): 0.3464% of customs value, with a minimum of $31.67 and maximum of $614.35 per entry.
- Harbor Maintenance Fee (HMF): 0.125% of customs value for ocean shipments.
- Customs broker fees: Professional fees for filing the customs entry and managing compliance.
- Domestic transportation: Delivery from the port to your warehouse or distribution center.
Calculating Landed Cost Accurately
The most common mistake is omitting or underestimating duty costs. Duties are calculated on the customs value — which may differ from the invoice price depending on the Incoterm and whether assists, royalties, or other additions apply. An experienced customs broker can help you calculate accurate landed costs before you commit to a purchase order.
For a detailed breakdown of brokerage fees and what to expect, see our guide on customs broker costs.