Landed cost

Landed cost is the total cost of getting a product to its destination, ready to sell: the factory price plus everything it takes to move it there — freight, insurance, customs duties, import taxes, and clearance and handling fees. It answers the only cost question that matters in cross-border commerce: not "what does the product cost?" but "what does the product cost here?"

As a formula:

Landed cost = product cost + freight & insurance + duties & import taxes + clearance & handling fees

What is included in landed cost?

Component	What it covers	What to watch
Product cost	Factory or supplier price, packaging included	The Incoterm behind the quote decides what else the price already contains
Freight & insurance	Ocean, air, or road transport to the destination, plus cargo insurance	Freight rates swing with the market — recost regularly, per shipment lane
Customs duties	Tariffs based on HS code, customs value, and country of origin	Rates differ per destination and trade agreement — the EU's Access2Markets portal publishes them per product and origin
Import taxes	Import VAT (EU/UK) or applicable sales-tax treatment (US)	Import VAT is only cost-neutral if your setup lets you reclaim it — without the right registrations it becomes real cost
Clearance & handling	Customs brokerage fees, terminal handling, inland transport to the warehouse	Small per-shipment fees, but real per-unit money on small consignments

Strictly, landed cost ends at the destination warehouse door. Many operators extend it with storage and fulfillment (see 3PL fees) into a "fully landed" or per-unit economics view — either is fine, as long as every SKU is measured the same way.

How do you calculate landed cost?

An illustrative example — figures are hypothetical, per one unit imported into the EU:

Line	Amount	Note
Factory price (FOB)	€10.00	Per unit, packaging included
Freight + insurance	€1.50	Container cost allocated per unit
Customs duty (example 5%)	€0.58	In the EU, duty is charged on the CIF value — goods plus freight and insurance (€11.50 × 5%)
Clearance & handling	€0.30	Brokerage and terminal fees allocated per unit
Landed cost per unit	€12.38	24% above the factory price — before storage, fulfillment, or marketing

Import VAT is paid at clearance on top of this but excluded from the table: for a properly registered business it is reclaimable and therefore cash flow, not cost. Note also that customs valuation differs by destination — the EU charges duty on the CIF value, while the US bases it on the goods' transaction value with freight excluded — so the same product has a different duty base in each market.

Why does landed cost matter?

Every cross-border decision quietly runs through it. Pricing: margin is set against landed cost per market, not factory price. Supplier choice: a cheaper factory in a country with a higher duty rate or longer freight lane can be the more expensive supplier. Market entry: the same SKU can be profitable in one market and underwater in another purely on duty and freight differences — a calculation that changed materially for the US after the 2025 tariff changes and the end of the de minimis exemption, covered in our guide to shipping to the U.S. And Incoterms decide who carries which components: under DDP, all of them sit on the seller's side of the ledger.

What do brands get wrong with landed cost?

• Pricing off the factory invoice. The most common margin killer in cross-border e-commerce: the "40% margin" set against a €10 factory price is a very different margin against a €12.38 landed cost.
• Treating import VAT as automatically neutral. It is only reclaimable with the right registrations and import setup; without them, 19–25% of the customs value silently becomes cost.
• Using one landed cost for every market. Duty rates, freight lanes, valuation bases, and trade agreements differ per destination — landed cost is a per-SKU, per-market number.
• Calculating it once. Freight rates move, tariffs change, currencies drift. A landed cost model from last year can be quietly wrong by double digits — recost on every major shipment and every tariff change, and pair it with work on the biggest controllable lever: reducing your shipping costs.

FAQ

What is the difference between landed cost and COGS?
COGS in the narrow sense is the cost of the goods themselves; landed cost adds everything required to get them to the destination market — freight, insurance, duties, and clearance fees. For cross-border brands, landed cost is the number that should drive pricing and margin decisions.

Does landed cost include VAT?
Import VAT is paid at clearance, but for a properly registered business it is reclaimable and usually excluded from landed cost as cash flow rather than cost. If your setup does not allow reclaiming it, it belongs in the calculation — as a real cost.

Is landed cost the same in every country?
No. Duty rates and even the valuation base differ by destination — the EU charges duty on goods plus freight and insurance (CIF), the US on the goods' value excluding freight — so the same product from the same factory lands at a different cost in each market.

Knowing your true landed cost per SKU per market is the foundation of profitable expansion — and building it means freight, duty, VAT, and clearance data most brands don't have. eBrands runs this calculation for every product we operate, as part of taking on your imports and compliance as Merchant of Record — see how it works for physical-goods brands.