How to Calculate Landed Cost for Product Sourcing!
Landed cost is the total cost to manufacture, ship, and deliver your product to its final destination. It includes the unit manufacturing price, shipping, packaging, insurance, customs duties, and any other fees between the factory and your warehouse or fulfillment center.
The Landed Cost formula:
Landed Cost = Manufacturing Cost + Tooling/Fixed Costs + Packaging + Shipping + Insurance + Duties and Taxes + Customs Brokerage + Fulfillment Prep
Getting this number right before you commit to production is one of the most important steps in product sourcing. Without it, you have no way to know whether your product can be sold profitably. At Cosmo Sourcing, we run landed cost analyses for nearly every client project, and I can tell you from experience that the final number is almost always higher than what people expect when they first start sourcing.
This guide walks through every cost component, shows you how to calculate each one, and provides a worked example you can follow for your own project.
Why Landed Cost Matters Before You Source
Most first-time buyers focus on the unit price from the factory and treat everything else as an afterthought. That is a mistake. I have seen projects where the factory quote looked great, but after adding shipping, duties, packaging, and prep fees, the product was barely breakeven.
Calculating landed cost early does three things for you. First, it tells you whether a product is viable before you invest significant time and money into sourcing. Second, it gives you the numbers you need to set your retail price and forecast margins. Third, it surfaces cost components you might have missed entirely, like compliance testing, special packaging, or unexpectedly high duty rates.
The general rule of thumb for Amazon FBA sellers is to aim for a landed cost that is roughly one-third of your retail price. The second third goes to Amazon fees, and the last third is your profit. If your landed cost exceeds that first third, you need to either increase your retail price, reduce manufacturing costs, or reconsider the product.
A screenshot of a completed pricing breakdown
The Components of Landed Cost
Each sourcing project is different, but the following cost categories apply to most imported products.
Manufacturing Cost
This is the per-unit price quoted by the factory, which typically includes raw materials, labor, and basic factory overhead. When collecting quotes, make sure the supplier specifies what is and is not included. Some factories include inner packaging in their unit price; others do not. Some include printing or labeling; others charge separately.
I always recommend getting quotes from at least three to five factories before settling on a price range. The spread between the highest and lowest quotes will give you a realistic budget range. If you need help organizing these quotes, our guide on avoiding sourcing scams covers how to evaluate which quotes are legitimate.
Tooling and Fixed Costs
Many products require upfront tooling, such as molds for injection-molded plastic parts, dies for metal stamping, or screens for printed fabrics. These are one-time costs, but they affect your per-unit economics, especially on a first order. A $3,000 mold amortized across 500 units adds $6 per unit. Across 5,000 units, it adds $0.60.
Other fixed costs can include design fees, pattern making, or sample development. Ask your supplier to itemize these separately from the unit price so you can calculate their impact at different order quantities.
Packaging
Packaging has two layers: individual product packaging (poly bags, retail boxes, hang tags, inserts) and export packaging (master cartons, pallet wrapping, corner protectors). Your factory quote may or may not include these.
Packaging requirements depend on your sales channel. Amazon FBA sellers need barcoded poly bags or boxes, suffocation warning labels, and FNSKU labels. Retail sellers may need UPC barcodes, branded packaging, or specific shelf-ready formats. DTC sellers typically need shipping-safe packaging that presents well when the customer opens it. Some of this work can be done at the factory, while some may need to be done at a prep or fulfillment center. Either way, it is a cost you need to account for.
Shipping and Freight
This is usually the second-largest cost component after manufacturing. Shipping costs depend on your shipment size, shipping method, origin, and destination.
Sea freight is the cheapest option for large shipments. Costs are based on container size (20-foot or 40-foot) or on a cubic meter basis for less-than-container-load (LCL) shipments. As of early 2026, ocean freight rates from Southeast Asia to the US West Coast have stabilized significantly compared to the pandemic era, but they still fluctuate seasonally.
Air freight is faster but far more expensive, typically three to five times the cost of sea freight per kilogram. It makes sense for small, high-value, or time-sensitive shipments.
To get accurate shipping quotes, you need the master carton dimensions, carton weight, total number of cartons, and the Incoterms you are using. Most sourcing projects use FOB (Free on Board), which means the supplier delivers the goods to the port, and the buyer covers the freight from there. Ask your supplier to quote both EXW (Ex Works, pickup at factory) and FOB so you can compare.
You can get preliminary shipping estimates from online freight calculators like Freightos or by contacting freight forwarders directly. For a more accurate estimate, I recommend contacting two or three freight forwarders with your specific shipment details.
Customs Duties and Import Taxes
Every product imported into the US (and most other countries) is subject to customs duties based on its Harmonized Tariff Schedule (HTS) classification. Duty rates vary widely by product category and country of origin.
For example, many consumer goods imported from Vietnam into the US carry duty rates between 0% and 10%. Products from China may face significantly higher rates due to additional tariffs that have been in effect since 2018, with many categories subject to rates of 25% or more on top of baseline duties.
We have a detailed guide on finding tariffs, duties, and customs fees for your product, including how to look up your HTS code using the US International Trade Commission's database at hts.usitc.gov. For a broader overview of how tariffs work, that guide covers the different types and how they are applied.
Since tariff policies change frequently, always verify current rates with official government sources before finalizing your landed cost estimate.
Customs Brokerage
A customs broker handles the import paperwork and clears your shipment through customs. Brokerage fees typically range from $100 to $250 per shipment for standard entries, though complex filings or shipments requiring additional agency clearance (FDA, FCC, CPSC) can cost more.
Insurance
Cargo insurance protects against loss or damage during transit. It typically costs around 0.5% to 1.5% of the shipment's declared value. For sea freight, insurance is strongly recommended. Losses do happen, and a single lost or damaged shipment without coverage can wipe out your margins for an entire product line.
Destination and Last-Mile Costs
Once your shipment arrives at port, you still have costs to get it to its final destination. These can include port handling fees, drayage (trucking from port to warehouse), and warehouse receiving fees. If you sell on Amazon, add FBA prep charges for labeling, bagging, and inbound shipping to fulfillment centers, which typically range from $0.50 to $2.00 per unit, depending on the prep center. If you ship to your own warehouse or a third-party fulfillment center (3PL), account for receiving fees, storage, and pick-and-pack costs. Retail sellers may also face distribution center requirements or compliance labeling from their retail partners.
Worked Example: Calculating Landed Cost
Here is a simplified example for a consumer product shipped from Vietnam to the US.
Order: 2,000 units of a custom fabric bag; the numbers are based on a real project, but rounded out for simplicity
| Cost Component | Total Cost | Per Unit |
|---|---|---|
| Manufacturing (FOB) | $8,000 | $4.00 |
| Tooling (screen setup) | $200 | $0.10 |
| Export packaging (master cartons) | $300 | $0.15 |
| Ocean freight (LCL, HCMC to Los Angeles) | $1,200 | $0.60 |
| Cargo insurance (~1% of goods value) | $80 | $0.04 |
| Customs duty (6.5% on FOB value) | $520 | $0.26 |
| Customs brokerage | $150 | $0.08 |
| Drayage and warehouse receiving | $350 | $0.18 |
| Fulfillment prep (labeling, poly bagging) | $1,400 | $0.70 |
| Total Landed Cost | $12,200 | $6.11 |
In this example, the factory price was $4.00, but the true landed cost is $6.11, which is over 50% higher. If this product retails for $18.99, applying the one-third rule means you have roughly $6.33 for landed cost, $6.33 for cost of sales (marketplace fees, advertising, fulfillment, or retail margin), and $6.33 for profit. At $6.11 landed, the math works. But if you had priced based only on the $4.00 factory cost, your projections would have been wildly off.
Common Mistakes When Calculating Landed Cost
Forgetting duties entirely. This is surprisingly common, especially for first-time importers. Duties are not optional, and they can be a significant percentage of your product cost.
Using air freight estimates for sea freight math (or vice versa). The cost difference is dramatic. Make sure your shipping estimate matches the method you actually plan to use.
Ignoring fulfillment and last-mile costs. The cost of getting your product from the port to a sellable, fulfilled state is real, whether that means FBA prep fees, 3PL receiving charges, or retail compliance labeling. Budget for it.
Not accounting for defects and overages. Factories typically produce 2% to 5% over or under the ordered quantity, and some units may arrive with defects. Build a small buffer into your estimates.
Using outdated tariff rates. Tariff policy has changed rapidly in recent years. Always verify against current official sources.
What You Need to Start
All you need to begin calculating landed cost is a product specification sheet and a rough idea of your order quantity. The spec sheet lets suppliers provide meaningful quotes, and the order quantity determines how fixed costs, such as tooling, are amortized.
You do not need a perfect spec sheet to get started. Soft quotes, which are preliminary supplier estimates, are sufficient for an initial landed cost analysis. You can refine the numbers as you move into the full sourcing process. Our Sourcing Kit includes validation templates specifically designed for organizing these estimates.
The goal at this stage is to get a realistic range, not a final number. If the range shows your product is clearly profitable, you can move forward with confidence. If the numbers are tight or negative, you know to either redesign, find cheaper manufacturing, or move on before investing further.
Cosmo Sourcing: Know Your True Landed Cost Before You Commit
Calculating landed cost accurately requires real factory quotes, current duty rates, and reliable shipping estimates. That is exactly what our product validation process delivers. We collect original quotes from 2 to 6 vetted factories, research your product's tariff classification and compliance requirements, and put together a detailed cost breakdown so you can see the full landed cost before you spend a dollar on production.
Unlike commission-based sourcing agents, Cosmo Sourcing charges a flat service fee. No markups, no hidden margins on your factory quotes. You receive the original numbers directly from each manufacturer, along with full contact details and direct introductions so you can build the relationship yourself. Since 2012, we have helped over 4,000 clients source more than 10,000 products across Vietnam, China, Mexico, and beyond.
Email: info@cosmosourcing.com Contact form: cosmosourcing.com/contact-us