The price on your supplier's invoice is not what your product costs. By the time a unit is on your shelf, ready to sell, you have also paid to ship it, insure it, clear it through customs, truck it to your warehouse and pay the bank for the currency exchange. Landed cost is the total of all of that, per unit.
Get it wrong and every number built on it is wrong: margins, price floors, ad budgets, reorder decisions. This guide shows what to include, how to allocate shared costs across products and how to keep it accurate.
In short: landed cost per unit = (product cost + every cost of getting the goods to your sellable location) / units received. Allocate shared costs by the driver that causes them (volume for freight, value for insurance), assign duty per line, and update the cost when late invoices arrive.
What Landed Cost Includes
Include every cost you pay to get the goods from the supplier to a location where they can be sold:
| Cost | Examples | Usually Allocated By |
|---|---|---|
| Product cost | Supplier invoice, tooling charged per order | Assigned to each line |
| International freight | Ocean, air or courier charges | Volume or chargeable weight |
| Insurance | Cargo insurance | Value |
| Duties and tariffs | Customs duty, extra tariffs | Assigned per line from its rate |
| Customs and brokerage | Broker fees, entry fees, port and terminal charges | Value or number of lines |
| Inland freight | Trucking from port to warehouse | Weight or volume |
| Payment costs | Wire fees, currency conversion margin | Value |
| Inspection and prep | Quality checks, labeling, bagging, kitting before sale | Units |
| Inbound to a marketplace | Shipping to Amazon FBA or another fulfillment network | Volume or units |
What it does not include: costs of selling the item after it is available, such as marketplace referral fees, FBA fulfillment fees, outbound shipping to the customer, advertising and returns. Those belong in your unit economics, but they are selling costs, not landed cost. Keeping them separate lets you see whether a margin problem comes from buying or from selling.
The Formula
Landed cost per unit = (Product cost + Freight + Insurance + Duties + Customs fees + Other inbound costs) / Units received
Use units received, not units ordered. If 1,000 were ordered and 980 arrived sellable, the shipment's cost is spread over 980, unless the supplier credits you for the missing 20.
Four Ways to Allocate Shared Costs
When one shipment carries several products, shared costs such as freight have to be split. Pick the driver that actually causes the cost:
| Method | How It Works | Best For | Watch Out For |
|---|---|---|---|
| By quantity | Each unit gets an equal share | Products of similar size and value | Small cheap items subsidize big ones |
| By value | Shares follow each line's product cost | Insurance, payment fees, ad valorem charges | Cheap bulky items look cheaper than they are |
| By weight | Shares follow total kilograms per line | Air freight, trucking | Light bulky items get too little |
| By volume | Shares follow cubic meters per line | Ocean freight, warehouse space | Needs accurate carton dimensions |
You can mix methods: allocate ocean freight by volume, insurance by value and inspection by units. The point is that each product carries the cost it actually caused.
Worked Example: One Shipment, Two Products
A shipment contains two products:
| Product | Units | Unit Price | Goods Value | Weight | Volume |
|---|---|---|---|---|---|
| Desk lamp (A) | 1,000 | $4.00 | $4,000 | 500 kg | 2 cubic meters |
| Floor lamp (B) | 200 | $15.00 | $3,000 | 400 kg | 3 cubic meters |
The shipment costs, and how each is split:
| Cost | Total | Method | Lamp A | Lamp B |
|---|---|---|---|---|
| Ocean freight | $1,200 | Volume (2 : 3) | $480.00 | $720.00 |
| Duty | $305 | Per line (5% on A, 3.5% on B) | $200.00 | $105.00 |
| Customs broker | $150 | Value (4 : 3) | $85.71 | $64.29 |
| Trucking to warehouse | $350 | Weight (500 : 400) | $194.44 | $155.56 |
| Insurance | $70 | Value (4 : 3) | $40.00 | $30.00 |
| Payment and currency fees | $105 | Value (4 : 3) | $60.00 | $45.00 |
Lamp A: ($4,000 + $480 + $200 + $85.71 + $194.44 + $40 + $60) / 1,000 = $5,060.15 / 1,000 = $5.06 per unit Lamp B: ($3,000 + $720 + $105 + $64.29 + $155.56 + $30 + $45) / 200 = $4,119.85 / 200 = $20.60 per unit
Lamp A lands at 26.5% above its invoice price; lamp B at 37.3%. If you had split every extra cost by value alone, lamp A would show $5.25 and lamp B $19.67. The bulky floor lamp would look $0.93 cheaper per unit than it really is, and you would price it too low.
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Duties, Tariffs and Rules That Change
Duty is calculated per product line from its tariff classification and country of origin, which is why the example assigns it per line rather than allocating it:
Duty = Dutiable value x Duty rate (plus any additional tariffs that apply)
A few points to check with your customs broker:
- Classification decides the rate. In the US, rates are published in the Harmonized Tariff Schedule. A wrong code means a wrong landed cost, and possibly a penalty.
- What duty is charged on differs by country. As a general rule the US excludes international freight and insurance from the dutiable value, while the EU includes freight and insurance up to the border. Your broker will confirm what applies to your entries.
- Low value shipments are no longer duty free in the US. Since August 29, 2025, US Customs and Border Protection has not granted duty-free de minimis treatment to shipments valued at $800 or less, and two interim final rules published on June 24, 2026 made that suspension indefinite, one for postal shipments and one for every other mode of arrival. If your landed costs for direct-to-customer imports assumed duty-free entry, recalculate them.
- Tariffs change. Additional tariffs have changed several times in recent years. Recalculate landed cost on every shipment rather than reusing last year's percentage.
When Costs Arrive Late
Freight invoices and duty bills often arrive after the goods. Two workable approaches:
- Estimate, then true up. Add the expected freight and duty to the purchase order before receiving, then adjust when the real invoice arrives.
- Receive at product cost, then add the rest. Simpler, but every unit sold before the adjustment carries too low a cost, so margins look better than they were.
Whichever you use, units that already sold keep the cost they shipped with. Only remaining units should absorb a later adjustment.
Why Landed Cost Changes Your Decisions
- Pricing and price floors. A repricer's floor has to start from landed cost, or it will happily sell at a loss. See repricing strategies that protect margin.
- Advertising. Break-even advertising cost of sale is your margin after landed cost and fees. Use invoice cost and you will overspend.
- Supplier choice. A cheaper supplier further away can land more expensive once freight, duty and longer lead times are included.
- Reordering. Bigger orders may cut freight per unit but tie up cash and space. Compare total landed cost per unit at each quantity.
- Accounting. Cost of goods sold and inventory value should use landed cost, and the costing method decides which landed cost a sale picks up. See FIFO vs average cost.
From Landed Cost to Profit per Unit
Landed cost is the first line of your unit economics, not the last. Using lamp A from the example, sold on a marketplace for $24.99:
| Line | Amount |
|---|---|
| Selling price | $24.99 |
| Referral and payment fees (15% for this example) | minus $3.75 |
| Fulfillment fee or pick, pack and postage | minus $5.40 |
| Landed cost | minus $5.06 |
| Advertising cost per unit sold | minus $2.10 |
| Returns allowance | minus $0.50 |
| Profit per unit | $8.18 |
On invoice cost alone ($4.00) the same sale would appear to make $9.24, which overstates profit by about 13%. Across thousands of units, that difference decides whether a product is worth restocking and how hard you can advertise it.
Domestic Purchases Have Landed Costs Too
Landed cost is not only for imports. Buying from a domestic wholesaler still involves inbound shipping, sometimes a drop fee or small order surcharge, card or payment fees, and your own prep and labeling before the stock can sell. These are often a smaller share of the price than for imports, but leaving them out still flatters every margin. If you pay to ship stock into Amazon's network or a 3PL, that cost belongs in landed cost as well.
Common Mistakes
- Using one percentage for every product. "Add 20% for freight and duty" hides the bulky items that cost far more to move.
- Spreading costs over units ordered. Short shipments make the real unit cost higher.
- Forgetting the small fees. Broker fees, port charges, wire fees and currency margins add up across a year of shipments.
- Leaving late invoices out. A freight bill that arrives a month later still belongs to those units.
- Mixing selling costs into landed cost. Referral and fulfillment fees belong in unit economics, not in inventory value.
Landed Cost Checklist
- Every purchase order records freight, insurance, duty, brokerage and other inbound costs.
- Each shared cost is allocated by the driver that causes it.
- Duty is calculated per line from its classification and origin.
- Costs are spread over units received, not units ordered.
- Late invoices are added and remaining units are updated.
- Inbound shipping to Amazon or another fulfillment network is included where you pay it.
- Price floors, ad targets and margin reports read landed cost, not invoice cost.
How Invechar Handles Landed Cost
In Invechar, you add freight, duty and other fees to a purchase order. When you receive it, they are spread across the received units and rolled into each unit's cost layer. Every order that ships later carries that true cost on its lines, so margin, inventory valuation and your accounting export use what the units really cost. Repricing floors start from each product's recorded cost, and the Brain warns you when the landed cost of recent purchase orders runs above it, so you can update the cost and your floors move with it. The Landed Costs page shows goods, freight, duty and other fees per purchase order, with landed cost as a percentage of goods.
Read the Help Centre article on landed costs, see purchasing and restocking, or check how costs flow into sales, margin and valuation reports.
Sources
- United States International Trade Commission, Harmonized Tariff Schedule search. Accessed October 8, 2026.
- Federal Register, Indefinite suspension of the de minimis exemption for merchandise arriving through all modes other than the international postal network and its companion rule for mail shipments (interim final rules, June 24, 2026). Accessed October 8, 2026. De minimis and tariff rules have changed often since 2025; check CBP's current guidance before you rely on them.
- The landed cost formula and allocation methods are standard cost accounting practice; the worked example uses illustrative numbers and duty rates.