How to Calculate Landed Cost and Set an Export Price

How do you calculate landed cost, step by step?

Landed cost is a sum, but the hard part is collecting every number that goes into it. These eight steps work for an exporter quoting an overseas buyer and for an importer or online seller bringing stock in from abroad.

• 1. Fix the named place. Decide where the cost stops: the buyer's warehouse, a marketplace fulfilment centre, or your own store room.
• 2. Start with ex-works cost per unit: materials, labour, a share of overheads and export packing.
• 3. Add financing: the cost of money tied up from paying suppliers to being paid, for example 10% a year over 75 days is about 2% of ex-works cost.
• 4. List every logistics line by stage, with a written quote: origin (inland freight, export clearance, terminal handling), main carriage (freight, surcharges, insurance), destination (handling, storage, delivery) and import clearance (broker fee).
• 5. Share the shipment's costs across products by weight, volume or value, then divide each product's share by its units.
• 6. Work out the customs value on the destination's basis (CIF-type or FOB-type), then duty = customs value x duty rate for the confirmed HS code.
• 7. Add import VAT or GST only if you cannot reclaim it.
• 8. Add it up per unit. That is your landed cost to the named place. Check it against the actual invoices after the shipment.

What goes into landed cost, and who pays each part?

Think of landed cost as a waterfall: each layer falls on the one before. Who pays each layer depends on the delivery term agreed in the sale. Incoterms rules, published by the International Chamber of Commerce, are a set of eleven three-letter terms that clarify the tasks, costs and risks between seller and buyer; the current edition took effect on 1 January 2020. They do not set the price, decide when ownership passes or settle payment terms, which belong in the contract.

Even when the buyer pays the later layers, an exporter should cost them. The buyer's landed cost decides whether your price works on the shelf, and a full costing lets you quote two terms side by side.

How should you share freight across a mixed shipment?

Most costs on a shipment are shared. There are three sensible ways to split them, and the right one is the one that matches how the cost was charged.

By weight suits dense goods and air or courier freight, which is billed on weight. By volume suits light, bulky goods and shared-container (LCL) sea freight, usually billed per cubic metre. By value suits insurance, which is a percentage of value, and shipments where one product is far more valuable than the rest. Run all three on a real shipment once: on some mixes the per-unit freight of a product changes by half depending on the method.

What is volumetric weight and why does it change the price?

Air cargo and express couriers charge on chargeable weight: the greater of actual weight and volumetric weight. Volumetric weight converts size into kilograms: length x width x height in centimetres, divided by the carrier's divisor. DHL Express, for example, says it typically uses 5,000 and bills on the higher of the two figures; air cargo commonly uses 6,000. Check the divisor in your own account terms.

A 60 x 40 x 45 cm carton weighing 17.6 kg has a courier volumetric weight of 108,000 / 5,000 = 21.6 kg, so it is billed as 21.6 kg, 23% more than it weighs. Re-pack the same goods into a 30 cm high carton and volumetric weight falls to 14.4 kg, below the actual weight, so the carton is billed on what it weighs. For bulky products, carton design is a pricing decision.

How is import duty calculated?

Duty is a percentage of the customs value, set by the product's classification and the destination's tariff. Classification uses the Harmonized System maintained by the World Customs Organization: six-digit codes used by more than 200 countries and economies and covering over 98% of merchandise in international trade, with countries adding their own digits. Have a customs broker confirm the code before a rate goes into a price.

The customs value basis differs. Many countries, including the EU and UK, value imports on a CIF-type basis that includes freight and insurance to the border. Others use a value nearer the export price; Australia's tax office, for example, defines customs value for low-value goods as the sale price minus freight and insurance from the place of export. A trade agreement can reduce duty, but only when the goods meet its rules of origin and you hold valid proof.

Import VAT or GST is usually charged on customs value plus duty. Registered importers can often reclaim it. Under a delivered duty paid sale, a seller who cannot reclaim it carries it as a cost.

A worked example: from landed cost to FOB and DDP prices

Here is a simple, original example in US dollars. A maker ships 500 cotton throws by sea. Ex-works cost is 12.00 per throw. Quotes for the shipment: origin charges 300, ocean freight and insurance 650, destination handling and delivery 400, import broker 150. The destination charges 8% duty on a CIF value; import VAT is reclaimed by the buyer, so it is left out. The target is a 30% margin on price, with 1.5% bank charges.

• The DDP price is 28% higher than the FOB price for the same goods: that difference is what the delivered term adds.
• The markup shortcut gives a price 11% below the margin-based FOB price on every throw.
• If the buyer's shelf price cannot carry the DDP price plus its own margin, no amount of negotiation fixes it: change the cost, the term or the market.

How do you set the export price once you know landed cost?

Use three methods together. Cost-plus (cost at your Incoterm divided by one minus margin and fees) gives the floor. Market-based pricing works back from the shelf price in the destination: remove VAT or GST, the retailer's margin, the distributor's margin and the importer's costs after your delivery point, and you have the most the chain can pay you. Value-based pricing decides where between floor and ceiling to quote, based on what makes your product different.

Quote in the buyer's currency if it helps you win orders, but use a dated rate with a small buffer, a short validity and a two-way band agreed in writing. Never let a quote stay valid longer than the freight quote behind it. Set minimum order quantities and price breaks where your cost per unit really falls, which is usually where a container fills.

What are the most common landed cost and export pricing mistakes?

Show landed prices early to cross-border shoppers too. Baymard Institute's checkout research finds that extra costs such as delivery, taxes and fees are the most common reason shoppers abandon a purchase, and its average documented cart abandonment rate is around 70%. Duty and tax collected at the door are exactly the kind of surprise that drives returns and refusals.

• Pricing from factory cost plus a habit markup, without the costs between the factory and the buyer.
• Confusing margin and markup: a 30% markup is only a 23% margin.
• Costing courier or air freight on actual weight instead of chargeable weight.
• Guessing an HS code or duty rate instead of confirming it with a broker.
• Forgetting financing, bank charges, storage on delivered terms and import tax you cannot reclaim.
• Quote validity longer than the freight quote behind the price.
• Own web store or marketplace prices that undercut the shelf price trade partners rely on.
• Never comparing actual invoices with the estimate, so the same surprise repeats.

What changed in 2025 and 2026 for low-value parcels?

Rules for low-value cross-border parcels tightened. The United States suspended duty-free de minimis treatment for commercial low-value shipments from all countries from 29 August 2025. The EU ended its 150-euro customs duty exemption on 1 July 2026 and introduced a temporary flat duty on low-value e-commerce items. In the UK, sellers selling directly to consumers charge VAT at the point of sale on consignments up to 135 pounds, and the government plans to remove the low-value customs duty relief. Australia requires overseas sellers and marketplaces to collect GST on goods with a customs value of 1,000 Australian dollars or less.

These rules move quickly. Check the official source for each destination before you price a parcel, and keep the date you checked next to the rate. If you want the whole method in one place, The Landed Cost and Export Pricing System from Bodhih Training includes a 20-sheet workbook, a container calculator and a dated duty and de minimis sheet. To check your own pricing arithmetic first, AssessAll's Business Arithmetic assessment is a quick starting point, and a Jobulary development plan can turn what you learn into goals for your team.