The unit price a factory quotes is not what your goods cost. Landed cost is what you actually pay to have a saleable unit sitting in a warehouse in the United States, and it is the only number that belongs in a margin calculation. This guide gives you the structure of that calculation and points you at the official sources for every rate. It does not give you rates, because rates change and a stale number in a business plan is worse than no number.
What “landed cost” contains
A workable model has five layers:
- Ex-works product cost — the unit price, plus tooling amortisation, plus packaging and any labelling the factory applies.
- Origin-side logistics — inland transport in China, export documentation, origin terminal handling. Whether you pay these directly depends entirely on your Incoterm.
- Freight and insurance — ocean, air or express, plus fuel and peak-season surcharges, plus cargo insurance.
- Duties and taxes at entry — the general duty rate for your classification, plus any additional duties that apply to goods of that classification and origin, plus merchandise processing and harbour maintenance fees where applicable.
- Destination-side costs — customs brokerage, terminal handling and chassis, drayage to warehouse, deconsolidation, receiving and put-away at the 3PL, and any repack or FBA prep.
Two structural points that trip up new importers:
- Duty is assessed on the customs value, not on your retail price. For most US imports that is the transaction value — the price actually paid or payable for the goods. Assists, royalties and certain commissions can be dutiable additions. US Customs and Border Protection publishes guidance on valuation at cbp.gov.
- Incoterms move costs, not obligations. DDP quoting does not eliminate the duty; it buries it inside a number someone else controls, and it can leave unresolved who is the importer of record.
The HS code decides more than the rate
Classification is where the money is, and it is the part buyers most often delegate to whoever ships the box.
Every imported article is classified under the Harmonized Tariff Schedule of the United States (HTSUS), searchable at hts.usitc.gov. The first six digits are the international Harmonized System; the remaining digits are US-specific. That ten-digit line determines:
- the general (Column 1) duty rate for your goods;
- whether additional duties attach to goods of that classification from your origin country;
- whether the goods are subject to partner-government agency requirements — FDA, CPSC, FCC, USDA and others flag entries by classification;
- what data elements your broker must file.
Three habits that keep classification honest:
Classify from the article, not the marketing. The tariff cares about material composition, function and construction. “Smart” and “premium” appear nowhere in the schedule.
Read the notes. Section and chapter notes in the HTSUS are legally binding text, not commentary, and they routinely move an article from the heading you assumed to a different one. The General Rules of Interpretation at the front of the schedule are the actual method.
Do not let the supplier’s HS code be your HS code. The exporter classifies for export in their own country’s schedule. The importer of record is responsible for the entry filed in the United States, and “my supplier told me” is not a defence.
If the classification is genuinely ambiguous and the money is material, a binding ruling from CBP is the mechanism the system provides for getting a definitive answer in advance; the ruling programme and the searchable database of prior rulings are both reachable from cbp.gov. A licensed customs broker or a customs attorney is the right professional to involve here — this page is a framework, not legal or tariff advice.
Duties stack
Buyers often model “the tariff” as one number. In practice several distinct measures can apply to the same entry, each with its own legal basis and its own list of covered classifications:
- the general HTSUS rate for the line;
- trade-remedy duties such as those imposed under Section 301, which apply to specified classifications from specified origins and have been revised repeatedly, with exclusion processes that open and close — the Office of the United States Trade Representative publishes the lists and notices at ustr.gov;
- antidumping and countervailing duties, which attach to specific products from specific producers and can be very large; scope determinations matter and are published;
- other statutory measures applying to particular goods or origins;
- fees: merchandise processing fee and, for ocean shipments arriving at certain ports, harbour maintenance fee.
Because every one of these is subject to change by notice, the only safe modelling practice is to look each one up at the primary source on the day you build the model, record the date and the source URL in the model itself, and re-check before you commit to a large purchase order. Rates published in blog posts, including this one, age badly. Federal notices are published at federalregister.gov.
Building the model
Build it per unit, but calculate freight and duty per shipment and allocate.
Step 1 — Fix the shipment. Units per carton, carton dimensions and weight, cartons per pallet, total cartons, total gross weight and total cubic metres. You cannot allocate freight without this, and the factory has all of it.
Step 2 — Allocate freight by the billing basis, not by unit count. Ocean LCL bills on the greater of weight or volume; air uses chargeable weight with a volumetric divisor; express uses dimensional weight. A light bulky product and a small dense product with the same unit price do not have the same freight cost per unit. See Shipping from China for how each mode bills.
Step 3 — Compute duty on customs value. Apply your classification’s rates to the correct value basis. Keep general duty, trade-remedy duty and fees as separate lines so that when one changes you can update one cell.
Step 4 — Add destination costs to the door. Brokerage and entry filing, ISF filing for ocean, terminal handling, drayage, chassis, warehouse receiving, and prep. These are per-shipment and get allocated the same way freight does. US warehousing and 3PL covers what receiving and prep typically include.
Step 5 — Add the costs everyone forgets. Cargo insurance. Payment costs and FX spread. Sample and tooling amortisation across the realistic first-year volume, not across the lifetime you hope for. Defect allowance — the units you will scrap or rework, which your inspection history should tell you. Demurrage and detention risk, which is not an expected cost but is a real one.
Step 6 — Express the result three ways. Landed cost per unit; landed cost as a percentage of ex-works price (a useful sanity check across products); and break-even selling price at your target contribution margin.
Sensitivities worth testing
Run the model at more than one point. The three variables that move landed cost most for a typical importer are freight rate, duty rate, and order quantity through its effect on freight allocation and MOQ pricing.
- What happens to margin if freight doubles? Ocean spot rates are volatile, and a plan that only works at the bottom of a rate cycle is not a plan.
- What happens if an exclusion lapses or an additional duty attaches to your classification? Model the version of your product’s duty picture that would hurt.
- What happens at half the order quantity? If the model only works at a volume you cannot sell in the first year, the problem is the order quantity, not the price — see MOQ, sampling and lead times.
Where importers lose money quietly
- Averaging duty across a mixed shipment. Different classifications in one container carry different rates; the average tells you nothing about the SKU you are about to reprice.
- Ignoring chargeable weight. Quoting freight per kilogram of actual weight on a bulky product understates cost badly.
- Modelling DDP as landed cost. A DDP quote is someone else’s estimate of your duty, wrapped in their margin, with the classification chosen by them and the liability still potentially yours.
- Forgetting returns. For consumer goods sold online, the cost of a returned unit is landed cost plus inbound freight plus processing, and only sometimes minus resale value.
- Not keeping records. Entry summaries, invoices, packing lists and valuation support have retention requirements. CBP can ask years later.
The one-line summary
Landed cost is a per-shipment calculation allocated to units, built on a classification you can defend, using rates you looked up yourself, on a date you wrote down.
This guide describes a costing framework and points to official sources. It is not legal, tariff or customs advice. Classification, valuation and duty liability are the responsibility of the importer of record; consult a licensed customs broker or customs attorney for your specific goods.
