What is landed cost?

The total cost of the product from origin to destination — inclusive of all duties, shipping tariff, taxes, delivery charges, and other additional fees — is called landed cost. It can also be referred to as total landed cost (TLC) and total delivered cost.

So, for example, let’s say your product costs USD 100. The duties levied were USD 80, the shipping fee USD 50, and other additional fees accounted for USD 70. So, the landed cost of the product will be USD 300.

Landed cost includes ALL the costs, fees, and prices that can be possibly levied on the product, including (but not limited to):

Calculating accurate total landed cost is necessary for your business to get the right idea about your actual cost price, and thus, determine the selling price and profit margins for a product accordingly.

To calculate the landed costs accurately, consider these six factors:

  • Product manufacturing costs
  • Packaging & handling fees
  • Shipping & transportation costs
  • Customs & taxes
  • Overhead charges
  • Risks involved (emergency funds)

The variations of landed costs

Landed cost varies for different regions nationally and from country to country, according to their trade laws and customs duties levied. It is also dependent on factors that affect shipping prices, like:

  • Mode of transportation (air freight is generally costlier than ocean freight)
  • Shipping route
  • Transit time
  • Peak season
  • Availability of containers
  • Fluctuations in the supply chain
  • Emergency situations (pandemic, war, etc.)
  • Global inflation, among others.

Knowing the landed cost also helps in gaining better clarity and transparency about costs that get added to the product after manufacturing. It helps you assess where your money is flowing (like inventory, shipping, taxes, etc.). With the available data and cost breakdown, businesses can take analytic-based decisions and maximize their profits.

To make a profit, your sell price must be above the landed cost.

Terms related to Landed cost

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