CALCURATES BLOG

What Is Landed Cost and How To Manage It for Your Ecommerce

Dec 2020
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Image of Nikolay Pasholok
Nikolay Pasholok
Product Owner, Calcurates
Landed cost is a term associated with international shipping. It is a sum of all the costs it takes to ship products across borders. Landed cost directly influences the profitability of your e-commerce business so it is crucial to account for landed costs properly when you do your accounting.

What Is Landed Cost?

Landed cost is the total amount of money it costs the retailer to get the product from the manufacturer to the customer. Basically, landed cost is the total price of a shipment once it has arrived at a customer's doorstep. Total landed cost includes various costs such as shipping costs, value-added taxes, customs duties, and insurance fees.

How to calculate landed cost of imported goods? How to calculate landed cost per unit? The formula of landed cost is the following: product + shipping + customs + risk + overhead = landed cost.
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Landed Cost Calculation Example

Let's say you're an e-commerce business in the United States importing 100 gadgets from China. You need to calculate the total cost of these gadgets, including all expenses incurred to get them to your warehouse.

  1. Product Cost (FOB China): $1,000. This is the cost of the gadgets at the factory gate in China.

  2. Shipping Costs:

    • Freight Cost: $500. The cost of shipping the gadgets from China to the US.
    • Customs Duties and Taxes: $300. Import duties, taxes, and customs fees paid to US Customs for importing the gadgets.
    • Freight Forwarder Fees: $200. Fees for services provided by the freight forwarder.
  3. Insurance: $50 The cost of insuring the shipment during transit.

  4. Miscellaneous Fees: $100 This includes any additional fees like handling charges, broker fees, or storage fees.

Now, add up all these costs:

  • Product Cost + Shipping Costs + Insurance + Miscellaneous Fees
  • $1,000 + $500 + $300 + $200 + $50 + $100 = $2,150
So, the total landed cost for your 100 gadgets is $2,150. This is the actual cost you incurred to get the gadgets to your warehouse, and it's crucial for pricing decisions, profit calculations, and inventory management. Keep in mind that landed cost calculations can get more complex when dealing with a variety of products, suppliers, and shipping methods.

Why Is Landed Cost Important for Your E-commerce?

It is important to calculate each cost accurately and include it in your accounting sheets. First of all, if you don't know how much it will cost you to ship merchandise internationally, you can't calculate your profit margins correctly. Accounting for manufacturing and shipping costs only is not enough. It may happen that all of the profit is wiped out altogether just by the landed costs. No customer wants to be surprised with unexpected extra costs upon receiving an order from abroad; not showing landed costs at checkout will likely result in a bad customer experience and feedback when the order is fulfilled.
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What Is Included in Landed Cost?

The fees included in the total landed cost can vary depending on domestic taxes, import duties, and optional costs such as insurance fees.
  • Shipping Costs
    Include transportation costs, costs associated with processing, packing, handling, and finally shipping the order. Shipping costs indicate how much it costs to ship the package to your customer per unit.
  • Customs Duty
    A cost that is paid for all the merchandise transported across the international borders. This is paid either by the seller or the buyer.
  • Insurance Fees
    These costs are optional and are usually paid for packages with fragile or expensive goods only. It is a cost that the buyer or seller pays for having the package shipped to its final destination safely. Insurance fees can include insurance against theft, damage, or loss.
  • Value-added Tax
    Charged for buying any sort of goods or services that need to be shipped across the borders. The term value-added corresponds to the costs incurred during each production stage; from raw material purchase to shipping.
  • Export & Import License
    This cost is the only subject to charge if a product needs official authorization or license in a given country. Check here if you need more info on the U.S. Export Licenses.
  • Port Charges
    Port charges are fixed costs that are not always applicable. Port charges are costs against a ship or cargo in a port.
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How to Calculate Landed Cost?

Calculating landed cost depends on the country of export and import. Not all costs are obligatory, and not all products require an export license or port charges.
To calculate the landed cost you need to include the cost per unit and then add the margin. The calculation should include costs for raw materials, manufacturing, customs duties, taxes, transportation, and shipping. An example of landed cost calculation may look like this:

(Shipping Cost + Customs Duty + Insurance + VAT + Import License) x 10% = Landed Cost


It is important to display accurate landed costs to customers at checkout when selling online internationally. Please note that this landed cost formula serves only as an example.
A calculation without Landed Cost:
Product Price: $10
Manufacture: -$5
Profit: $5
A calculation with Landed Cost:
Product Price: $10
Manufacture: -$5
Landed Cost: -$10
Loss: $5

What Are the Benefits of a Landed Cost?

  • Information for Customers at the Checkout
    As a retailer, you have to display all the information about landed costs. The reason is simple: no one wants to be surprised with unexpected extra costs upon receiving an order from abroad. Consider implementing the Landed Cost shipping feature to your e-commerce. This feature enables you to show or hide applicable taxes and duties at checkout for your customers.
  • Profit Margin
    As a retailer, you need to know the cost of each product. Setting the prices too high will lower your sales, setting them too low will result in no profit. Landed cost helps the retailers to understand the cost of each imported or exported product, thus allowing you to set the profit margins properly.
  • Savings in Supply Chain
    The different costs involved in purchasing the goods, shipping, packaging, helps you see where savings in the supply chain can be made. Miscalculating some of the expenses in the supply chain can have an impact on your profits. 
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What As the Customs Process?

Customs Process is a process of getting shipment across the borders. Each country has an assigned governmental agency overseeing the whole customs process, especially if the shipments meet the international trade laws. Only the destination country can say if the shipments are legally allowed to enter the country. Make sure you have the necessary import license for the destination country.

How to Manage Landed Cost With Calcurates

Landed Cost for Magento 2, Shopify and WooCommerce
The calculation can be tricky sometimes, especially if the shipping rules vary from country to country. Automatization of the Landed Cost feature allows you to customize, display, and hide the landed costs depending on the country of origin or product description for more shipping flexibility. The Landed Cost feature is available for all major carriers when using international shipping. The Landed Cost displays the international costs to your customers at checkout.

For more information have a look at our International Shipping feature which explains the landed cost functionality. Sign up for our free trial to test our Landed Cost calculator to estimate your monthly expenses and see if Calcurates is suitable for your E-commerce. Calcurates extension is available on Magento 2, Shopify, and WooCommerce.
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