What is landed cost: Why is it important for an export business?

Landed cost is the sum of expenses associated with production to shipping of a product. Learn more about its importance, elements and cost calculation in this blog.
landed cost
Exporting a product from India to another country requires planning in terms of costs incurred, documents required, logistics, etc. To make informed decisions and run a hassle-free international trade business, it is important to understand end-to-end procedures and relevant expenses.

What is the landed cost?

A product’s landed cost, known as landed price, is usually all the expenses incurred from production to logistics and reaching the importer. These costs or fees include customs clearance, charges, insurance, taxes, and storage. In other terms, the landed cost is the sum of retail price, freight transportation, insurance, any taxes and customs charges, processing fees, brokerage fees, dock or terminal fees, and any additional costs incurred to get goods to its final destination1.

Importance of landed cost

In order to make informed choices, businesses need to be aware of the landing price of goods that are being exported. A business that wants to import goods to resell them locally needs to understand and have an estimate of the final cost of goods. This can help the business plan budget for the total amount spent on product acquisition and transportation.

How to calculate landed cost?

Landed cost is usually calculated by combining:

Unit price + transportation expenses + taxes + duties + insurance premiums + administrative charges

There may be price differences between orders due to special discounts or free shipping offers.

Elements of landed cost

There are many factors that affect a product’s final price. Some of them are:

Product production cost

A product’s price includes all development, acquisition, and distribution costs like finished product, raw materials, and other components.

Shipping cost

Shipping expenses include freight, transportation, and packaging, which depend on delivery time, measurement, and weight.


Customs-related expenditures include duties, tariffs, brokerage fees, harbor fees, taxes, and VAT.

Loss insurance price

Risk coverage costs include insurance premiums, quality assurance, and regulatory compliance. Shipping insurance is optional but usually recommended.

Fixed expenses

‘Overhead costs’ include stock costs, employee salaries, and benefits, payment processing fees, foreign exchange fees, etc.

Tips to calculate landed costs

Below are a few tips to calculate landed costs:
1. Convert currency for a realistic cost estimate. Use conversion rate on the expected delivery date for accurate figures.
2. Landed prices vary by shipment type. For accurate data, landed cost must be determined for each shipment. Even with similar items, delivery methods, and freight forwarders, landed charges may differ.
3. Fees, tariffs, taxes, exchange rates, and other variables impact freight expenses year-round.
4. Landed cost calculations help you control returns. Shipping, customs, taxes, and other fees must be considered when planning international returns. Considering these might help you determine the cost of free returns and delivery.

Tips to reduce landed costs

Below are tips to reduce landed costs when planning an international trade deal:
· Find new sources for raw materials and manufacturing requirements by establishing contact with providers in the area or inside the country.
· Carriers frequently offer discounts based on volume and other factors that can be negotiated.
· Simplify process inventory management and decrease associated overhead costs that contribute to the landed cost.
· Move storage facilities closer to the port or other entry points.
· Optimize inventory

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Frequently Asked Questions

What is the difference between Free On-Board (FOB) and landed cost?
Free On-Board is the price a retailer pays a manufacturer to buy products. This cost usually includes export packaging, fumigation, paperwork, and container packing before delivery. Landed cost is usually all the expenses incurred from production to logistics and reaching the importer.
Is landed cost the same as Cost of Goods Sold (COGS)?
COGS is a part of the landed cost.
Does landed cost support products shipped from different countries?
A product’s landed cost includes unit price, shipping costs, taxes, import and export tariffs, insurance, transaction and handling fees, currency conversion rates, and any additional storage costs. Shipping fees can change from nation to country, season to season, and amount shipped to shipped.
What is the difference between standard cost and landed cost?
Material, labour, overhead, etc. are the standard cost components. Freight and other landed costs increase the Standard Cost by including these previously excluded expenses.
Is VAT a landed cost?
Yes, it is included in the landed cost.
What is an example of export finance?
Letters of credit, open accounts, consignment sales, and export factoring are all types of export financing.
Published on December 29, 2022.


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