The factory price is not your cost. It's the price of a product sitting at a port on the other side of the world. By the time it reaches your warehouse, the real number, your landed cost, is often well above it. Brands that price from the factory quote find out the hard way, usually on their first reorder.
What goes into landed cost
Landed cost is everything you pay to get one sellable unit onto your shelf. For a typical import into the US, that means:
- Product cost: the factory price, usually quoted FOB (free on board), which covers the goods loaded at the port of export.
- Packaging: retail boxes, inserts, hang tags, polybags and cartons, if they aren't in the quote.
- Inspection: a pre-shipment quality inspection, which you should budget for on every first order.
- Freight: ocean or air, port to port, plus fuel and other surcharges.
- Insurance: cargo insurance on the shipment.
- Duty: set by your product's tariff classification (HTS code) and country of origin, and calculated on the declared value of the goods.
- Customs fees: small US fees such as the merchandise processing fee and, for ocean freight, the harbor maintenance fee.
- Customs broker: the broker who files your entry.
- Inland delivery: trucking from the port to your warehouse.
- Receiving: your warehouse's fee to unload, count and put away the stock.
A worked example
Here's a simplified first order of 2,000 water bottles. The numbers are illustrative, not quotes, but the shape is typical:
| Line | Total | Per unit |
|---|---|---|
| Factory price (FOB) | $12,000 | $6.00 |
| Retail packaging | $1,600 | $0.80 |
| Pre-shipment inspection | $350 | $0.18 |
| Ocean freight and insurance (shared container) | $1,900 | $0.95 |
| Duty and customs fees (example rate) | $1,100 | $0.55 |
| Customs broker | $250 | $0.13 |
| Port to warehouse trucking | $700 | $0.35 |
| Warehouse receiving | $300 | $0.15 |
| Landed cost | $18,200 | $9.10 |
A $6.00 bottle actually costs $9.10, about 50% more. Price it at $28 retail from the $6 number and you think you have a 79% margin. From the real number, it's about 68%. Sell it wholesale at $14 and the gap gets wider: 57% on paper, 35% in reality, before you've spent a dollar on marketing, shipping to customers or overhead.
The number that changes fastest: duty
Freight and fees move a little. Duty can move a lot. The rate depends on the exact HTS classification and the country of origin, and additional tariffs on some countries have changed repeatedly in recent years. Two products that look identical can carry very different rates if the materials differ.
Before you set a price, confirm three things with a licensed customs broker: the HTS code for your product, the base duty rate, and any additional duties that apply to your country of origin right now. Then build a cushion into your price in case rates change before your reorder.
Four rules we use
- Price from landed cost, never from FOB. If you only have a factory quote, multiply by 1.4 to 1.6 as a placeholder until you have real freight and duty numbers, then replace it.
- Calculate it per SKU. A heavy product and a light one in the same container carry very different freight per unit.
- Recalculate on every order. Freight rates, duty and exchange rates all move. Last order's landed cost is a starting point, not a fact.
- Check wholesale margin, not just retail. If you'll sell to retailers, your margin at wholesale price is the one that decides whether the product works.
The Product Line Plan and BOM Sheet has a landed-cost tab that does this math per SKU. If you want a second pair of eyes on your numbers, book a time with our team.