Landed cost: what imported goods actually cost delivered

The delivery term decides what is already inside the price

A quoted price only means something once you know which costs the seller has already absorbed. A price where the buyer collects from a factory carries none of the onward movement; a price delivered into the buyer's warehouse with charges paid carries almost all of it. Comparing supplier quotations without normalising them to the same delivery basis compares two different products, and the cheaper-looking quotation is frequently the one with more cost still to come.

Charges levied by the state, and their different afterlives

Customs duty is a cost that stays in the product. Consumption tax charged at import is usually recoverable by a registered business and therefore belongs in cash flow rather than in margin. Excise, where it applies, is a cost until the goods leave the controlled system. Lumping all three into a single line labelled taxes produces a cost figure that is simultaneously too high for pricing and too low for cash planning.

The operational layer nobody quotes for

Terminal handling at both ends, documentation and brokerage fees, inspection and examination charges, storage while a hold is resolved, equipment detention, inland haulage, unloading, and the cost of returns and rework on goods that arrive damaged. Several of these are contingent, so they do not appear in a plan and always appear in the accounts. Building an allowance for them from your own historical data is more honest than pretending they are exceptional.

Money tied up along the way

Goods bought from a distant supplier are paid for long before they are sold, and the working capital consumed by that gap is a real cost of the sourcing decision. So is the tax funded at the frontier and recovered on a later return, and the security supporting a deferment or guarantee arrangement. A sourcing comparison that ignores the cash cycle systematically favours the more distant supplier.

Allocating shared costs to individual products

A container carries several product lines and one freight bill, so the allocation basis, whether by value, weight or volume, changes the apparent profitability of every line inside it. There is no universally correct basis, but there is a wrong practice: choosing a different one each time. Fixing the method, documenting it and applying it consistently makes product-level margins comparable across periods, which is the whole point of measuring them.

Frequently asked questions

Should recoverable import tax be included in landed cost?

Not in the cost used for pricing and margin, because the business gets it back. It absolutely belongs in the cash flow model, since it is funded at import and recovered later, and for a fast-growing importer that timing difference is a material call on working capital.

How should currency movement be handled?

As its own line rather than buried in the goods cost, because it behaves differently: it is a market exposure that can be hedged, and mixing it into product cost makes it impossible to see whether a margin problem came from sourcing or from the exchange rate.

What is the most commonly forgotten element?

Contingent charges after arrival, particularly storage and equipment detention when a consignment is held. They are unpredictable per shipment and quite predictable in aggregate, so the fix is an allowance based on your own history rather than an assumption that this year will be clean.