How to calculate landed cost from China

Landed cost is everything you spent to put one sellable unit in your warehouse, divided by the units you can actually sell, and it is neither the unit price nor the invoice total. In the example used in this guide, 5,000 units of a phone accessory at USD 2.00 ex-works end up at USD 3.10 per sellable unit: 55% above the invoice, spread across eleven line items plus two that almost nobody records.

What landed cost is and why it is not the invoice price

Landed cost is a quotient built from two numbers that are usually chosen badly: the numerator, everything you paid, and the denominator, the units you can sell. The supplier price is the first line of the numerator, and the invoice total is that line multiplied: neither of the two will set a selling price for you.

The denominator is the one most often got wrong: 5,000 units with 4% shrinkage are 4,800 sellable units across which every fixed cost has to be spread. That is why landed cost is the only comparable figure between two suppliers, and only against the same destination, the same volume and the same delivery terms.

The eleven line items that make up landed cost

Landed cost is built from eleven line items, and only the first of them appears on a supplier’s quotation. Who charges each one and how it is calculated is set out below; the commission bands themselves are published on the pricing page.

Duty is charged on the CIF value, not on the ex-works price, so expensive freight makes the duty and the VAT more expensive too: transport is paid for twice.

The two line items almost nobody records: shrinkage and the cost of capital

No quotation includes these two lines, and they are what make a product that looks profitable in the spreadsheet lose money.

Shrinkage. A lot can pass an AQL inspection and still contain defects: sampling accepts the lot when the defects fall within the acceptance criterion, not when there are none. Transport damage and the spares needed for returns come on top of that. Between 3% and 5% non-sellable units is normal in consumer electronics: on 5,000 units, between 150 and 250 that you paid for and will not sell.

The cost of capital. The money leaves your account with the deposit and does not come back until the product sells; on a sea shipment from Shenzhen, in the order of two months.

How to amortise one-off costs correctly

A one-off cost does not belong to the order in which it was paid: it belongs to every unit that investment is going to let you sell.

The mistake is dividing it across the units of the first order. With USD 2,260 of tooling, certification and samples spread across the 5,000 units of the first order, you add USD 0.45 per unit; across the 15,000 you can reasonably expect to sell of that reference, it is 0.15. Almost USD 0.30 of difference, enough to discard a profitable product.

The rule is to write down the units you expect to sell from that investment, not the units you are buying. If you do not know yet, amortise over the first order and mark it as conservative. In Mexico and Brazil the certificate is tied to the model and to the holder, and some families carry periodic maintenance: where they do, it is an annual cost.

Full example: 5,000 units of an accessory at USD 2.00

An order of 5,000 units at USD 2.00 ex-works, delivered to Mexico City by consolidated sea freight, 2 m³, with an estimated 4% shrinkage. The sellable units are 4,800 and the purchase value falls in the 7% band.

The line items that vary by shipment — freight, insurance, duty and clearance — carry example amounts, not rates, and the 15% duty is an assumption, not the rate for your product.

Import VAT is not in the table, and that is deliberate. It is calculated on the customs value plus the DTA and the other charges, at the general 16%: here it would be about USD 1,913. If you import with your RFC it is recoverable and works as a treasury cost; if you import on DDP with a third party as the registered importer you do not receive an import invoice in your own name, you cannot recover it, and then it is a cost: about USD 0.40 more per unit.

The cost of capital tied up, with the arithmetic done

The formula is capital tied up × annual rate × days ÷ 365. The capital tied up is the USD 11,624 of goods, commission, inspection, inland transport, documentation, freight and insurance paid out before the goods are in your warehouse, and the term is 70 days.

11,624 × 0.24 × 70 ÷ 365 = USD 535.02, or USD 0.11 per sellable unit

The 24% annual rate is an assumption in the example, not a market rate: use the cost of your own credit line.

Ignoring this line does not only make the cost look cheaper, it distorts the comparison between products. Two references with the same landed cost and different replenishment cycles are not equally profitable: the one that takes 70 days to generate cash again needs more margin per unit. If shrinkage is ignored as well, the calculation comes out at 2.87 instead of 3.10.

Break-even and selling price

You do not get from landed cost to price by adding a percentage, but by dividing, because the marketplace commission and the margin are calculated on the selling price and not on your cost.

Minimum price = (landed cost + shipping to the customer + expected returns) ÷ (1 − marketplace commission − target margin)

With landed cost 3.10, shipping to the customer 1.20 and expected returns 0.35, a platform commission of 16% — it varies by category — and a target margin of 20%:

(3.10 + 1.20 + 0.35) ÷ (1 − 0.16 − 0.20) = 4.65 ÷ 0.64 = USD 7.27

Every dollar of cost you fail to account for becomes more than a dollar of price you never charge. With a divisor of 0.64, every dollar of cost requires USD 1.56 of price. The USD 1.10 gap between ex-works and landed cost becomes USD 1.72 of price.

The four mistakes that distort landed cost the most

What varies and has to be recalculated every time

Freight and taxes are not copied across: they are quoted. Rates change by carrier, route and season; insurance depends on the value and the route; laboratory and authority fees change by standard and category.

In Mexico, the tariff line has stopped being stable. The December 2025 decree raised the rates on 1,463 TIGIE tariff lines to 5%–50% for imports from countries without a trade agreement, in force temporarily until 31 December 2026, and electronics is among the affected sectors. Goods originating under T-MEC keep their preference if they meet the rules of origin, and temporary importation under IMMEX is deferred, not exempt. The DTA is 8 per thousand and is not recovered; the 16% import VAT is recoverable if you are the registered importer.

In Brazil, the tax line is a cascade, not a rate. On the customs value, Brazil applies the Import Tax according to the NCM, the IPI, the import PIS and COFINS, the Siscomex fee, the capatazias and the AFRMM, which levies 8% of long-haul sea freight. State ICMS is calculated gross-up — the base is the subtotal of the previous items divided by one minus the rate — and it changes from state to state.

Brazil is also in the middle of a tax reform transition. The import PIS and COFINS are being replaced by the CBS and the ICMS by the IBS, in a gradual period running to 2033 in which both regimes coexist during 2026: any template from a previous order has to be rebuilt.

How to check it before you pay

A landed cost is audited with four questions: the factory invoice unmodified, the carrier’s rate and who issues it, the tariff line or NCM that will be declared, and what happens if the lot fails the inspection. MeliPrep hands over the invoice without a markup and bills freight at cost; the cost calculator adds commission, inspection and labelling, and accepts your own freight quote.

Landed cost is not a purchasing formality, it is the price at which you actually buy. Whoever calculates it once and copies it into the following orders ends up setting prices on a number that no longer exists.