Landed Cost

Back to Glossary

What is Landed Cost?

Landed cost is the total cost of a shipment delivered to a specified location, including the cost of goods and all expenses required to move those goods from the supplier to the final destination. This view helps businesses price accurately, understand true profitability, and manage end-to-end supply chain spend.

The product value shown on the supplier’s invoice, along with international freight charges for ocean or air transport are included in landed cost. It also accounts for insurance where transit risk cover is arranged, as well as duties and taxes imposed by customs, which vary by destination country and product classification. Destination-related costs such as terminal handling, unloading, and storage must be added, together with any additional fees including brokerage, compliance charges, and inland or final-mile transport to the delivery point.

How to Calculate Landed Cost

  • Start with product cost: Use the supplier’s invoice value.

  • Add freight and insurance: Include all transport and insurance charges for the move.

  • Include duties and taxes: Estimate based on tariff classification and destination rules.

  • Add destination and inland costs: Include handling, clearance, and delivery to the final location.

  • Calculate the total: Sum each cost component to get the landed cost figure.
     

Why Landed Cost Matters in Shipping Decisions

Looking only at freight rates or product prices can be misleading if duties, local charges, or inland transport differ significantly between scenarios. Using landed cost helps you:

  • Compare routes and modes: A cheaper ocean rate may be offset by higher destination or inland costs, while a slightly higher air or alternative port route could reduce total landed cost.

  • Select suppliers and Incoterms: Different suppliers, origins, or Incoterms (such as FOB vs CIF) shift who pays which charges, changing the true cost of getting goods to your door.

  • Set prices and margins: Understanding the full cost per unit supports accurate pricing, margin protection, and better decisions on which markets or product lines to prioritise.