Landed Cost Formula: What to Include and a Worked Import Example
Landed cost per unit = (Product cost + Freight + Insurance + Duties and tariffs
+ Customs fees + Broker fees + Inbound handling) ÷ Units received
That is the whole formula. The work is in filling every bracket honestly, because the number you get is the one your margins, pricing and reorder decisions should run on. If you price off the factory invoice alone, every unit you sell is quietly subsidizing the freight bill.
The Line Items, One by One
Landed cost covers everything you pay to get stock from the supplier’s door to a shelf where you can sell it. Here is what belongs in each bracket.
| Line item | What it covers | Where the number comes from |
|---|---|---|
| Product cost | Unit price times quantity, plus any tooling, sampling or packaging charges on the invoice | Supplier’s commercial invoice |
| Freight | Origin trucking, ocean or air freight, port charges, delivery to your warehouse | Freight forwarder quote and final invoice |
| Insurance | Cargo insurance for the shipment | Forwarder or insurer |
| Duties and tariffs | Duty rate for the product’s tariff code, plus any additional tariffs in force | Harmonized Tariff Schedule and your customs broker |
| Customs fees | Merchandise Processing Fee, Harbor Maintenance Fee on ocean cargo | U.S. Customs and Border Protection (CBP) |
| Broker fees | Customs entry filing, bond, ISF filing on ocean shipments | Customs broker invoice |
| Inbound handling | Receiving, labeling, palletizing at your warehouse or 3PL | Your warehouse or 3PL rate card |
Leave out marketing, platform fees and outbound shipping. Those are selling costs, not landed costs. Keeping them separate lets you compare the same product across channels without double counting.
Duties and Customs Fees: Where Most Errors Happen
Duty rates depend on the product’s classification in the Harmonized Tariff Schedule. The same item can carry very different rates depending on material and use, and additional tariffs can stack on top of the general rate. Get the classification confirmed by your broker before you lock a retail price.
The Merchandise Processing Fee (MPF) applies to formal entries, which generally means shipments valued over $2,500 (19 CFR 143.21 sets $2,500 as the informal entry limit). CBP’s Fiscal Year 2027 user fee notice keeps the rate at 0.3464% of value, with a minimum of $34.58 and a maximum of $670.86 per entry, required as of 1 October 2026 (checked 5 November 2026). On a small container, the minimum is often what you actually pay.
The Harbor Maintenance Fee is 0.125% of the cargo’s value when it moves through a covered port by vessel, per 19 CFR 24.24 (checked 5 November 2026). Air shipments don’t pay it.
De minimis is gone for most imports. Low-value shipments under $800 used to enter duty-free. CBP published an interim final rule effective 24 June 2026 that indefinitely suspends that exemption for shipments arriving by any mode other than the international postal network (checked 5 November 2026). If your old landed cost sheets assumed small parcels came in duty-free, rebuild them.
This is general information, not customs or legal advice. Your licensed customs broker and the official sources above are the authority for your entries.
Worked Example: One Ocean Shipment, One SKU
Example numbers, not benchmarks. A store imports 1,000 units of a kitchen gadget by ocean freight.
| Line item | Calculation | Amount |
|---|---|---|
| Product cost | 1,000 × $4.00 | $4,000.00 |
| Freight (door to warehouse) | Forwarder quote | $900.00 |
| Cargo insurance | Forwarder quote | $60.00 |
| Duty | Illustrative 10% × $4,000 | $400.00 |
| MPF | 0.3464% × $4,000 = $13.86, below the $34.58 minimum | $34.58 |
| Harbor Maintenance Fee | 0.125% × $4,000 | $5.00 |
| Broker fees | Broker quote | $150.00 |
| Delivery and receiving | Trucking plus warehouse receiving | $250.00 |
| Total | $5,799.58 |
Landed cost per unit = $5,799.58 ÷ 1,000 = $5.80
The factory price was $4.00. The real cost is $5.80, which is 45% higher. If you priced the product at $12 assuming a $4 cost, your gross margin looked like 67%. On landed cost it is closer to 52%, before a single selling fee.
Two notes on the example. First, duty here is calculated on the product value only. In the US, duty is generally assessed on the transaction value of the goods, which usually leaves out international freight and insurance, but your broker should confirm the value basis for your entry. Second, the 10% duty rate is made up for the arithmetic. Look up your own code.
Allocating Shared Costs Across Several SKUs
Most shipments carry more than one product. Freight and insurance then need splitting, and the method matters.
- By value: fair for duty, insurance and MPF, which are charged on value anyway.
- By volume (cubic feet): better for freight, because ocean and air freight are priced on space as much as weight.
- By weight: use it for dense, heavy goods where weight is the binding constraint.
- By units: simplest, but it overcharges small items and undercharges bulky ones.
Example numbers, not benchmarks. A $900 freight bill covers 600 units of SKU A (0.05 cubic feet each) and 400 units of SKU B (0.15 cubic feet each).
SKU A volume = 600 × 0.05 = 30 cu ft
SKU B volume = 400 × 0.15 = 60 cu ft
SKU A freight = $900 × 30 ÷ 90 = $300 → $0.50 per unit
SKU B freight = $900 × 60 ÷ 90 = $600 → $1.50 per unit
Split by units instead, each SKU would carry $0.90 per unit. SKU A would look worse than it is and SKU B would look better. That kind of error decides which product gets reordered.
A Short Checklist Before You Trust the Number
- Use final invoices, not quotes, once the shipment lands. Update the per-unit figure in your inventory system.
- Divide by units received, not units ordered. Short shipments and damaged cartons raise the real cost.
- Include the warehouse or 3PL receiving fee. It is small per unit and easy to forget.
- Recheck duty rates whenever tariffs change. A rate that was right last quarter may not be right now.
- Record the landed cost per SKU per shipment. Costs move between shipments, and an average hides the drift.
- Keep selling costs (platform fees, ads, outbound shipping) in a separate column so you can see contribution margin by channel.
When Landed Cost Changes Your Decisions
A clean landed cost figure feeds three decisions directly. Pricing: set retail on landed cost, not factory cost. Reorder quantity: larger orders spread fixed costs like the MPF minimum and broker fees across more units, which you can see in the per-unit number. Mode choice: air freight costs more per kilo but skips the Harbor Maintenance Fee and cuts the weeks of cash tied up at sea. Run both modes through the same formula and compare per unit.