How to Calculate Landed Cost
Understanding how to calculate landed cost when bringing a product from its origin to its final destination is critical for businesses. Landed cost, distinct from the Cost of Goods Sold (COGS), encapsulates the total expenditure incurred in acquiring and transporting goods, encompassing not only the product cost but also a range of additional expenses. Supply Chain Shark, through its Importer Managed Services, ensures a meticulous calculation of landed costs, providing clients with a transparent and detailed overview of their financial commitments. In this post, we share how we calculate landed cost for ourselves and our clients.
Defining Landed Cost vs. COGS
The Cost of Goods Sold (COGS) represents the direct costs associated with the production of goods or the purchase of goods for resale. This includes expenses such as manufacturing costs, materials, and direct labor. On the other hand, landed cost extends beyond the production phase and encompasses the total expenses incurred until the goods reach the buyer’s hands. Landed cost includes not only the product cost and import duties but also a range of additional charges associated with transportation, insurance, and regulatory compliance fees. A more detailed breakdown of COGS vs. landed cost can be found here.
Mandatory Landed Cost Inclusions: A Minimum Standard
Supply Chain Shark ensures that its Importer Managed Services include, at a minimum, the following costs in the landed cost calculations:
Product Cost: The fundamental starting point, encompassing the purchase price of the goods and associated expenses directly related to the procurement process.
Import Duties: A thorough assessment of import duties based on Harmonized System (HS) codes, origin of goods, and any applicable trade agreements.
Freight: Comprehensive evaluation of freight costs, covering charges for transportation, insurance, handling fees, and other expenses incurred during transit.
Insurance: Examination of insurance costs to safeguard against potential risks during the transportation of goods.
Certification and Testing Fees: Inclusion of fees associated with certifying product quality and safety, ensuring compliance with relevant standards.
Inspections: Incorporation of inspection costs, including in-line inspections and pre-shipment inspections, to guarantee the adherence of products to specified standards.
What does this look like?
Below is an example from our Importer Managed Services dashboard that we use for our own brand, Beartooth Trading (read about how we set up our own brand to learn tips and tricks for our clients).
Landed cost overview for a product offered by Beartooth Trading, a brand managed by Empress Brokers International LLC and Prosperity Solutions LLC.
Flexibility for Client-Specific Inclusions
We understand that each client may have unique requirements or specific costs associated with their products. Therefore, our Importer Managed Services offer flexibility to incorporate additional costs at the client’s request. This may include product design fees, royalties, or any other expenses pertinent to the client’s business model.
Seamless Calculation with Cutting-Edge Tools
Underpinning our commitment to accuracy and efficiency, Supply Chain Shark employs advanced tools within the platform. Our proprietary tools seamlessly collect and integrate all commercial documents, freight invoices, and relevant data. This infrastructure streamlines the calculation process, ensuring that clients have access to real-time and precise landed cost information.
In the ever-evolving landscape of global trade and sourcing, understanding and calculating landed costs is indispensable for businesses engaged in importing goods. Supply Chain Shark’s Importer Managed Services offer a holistic approach to landed cost calculations, going beyond the basics to include a comprehensive array of expenses.
By ensuring the inclusion of product cost, import duties, freight, insurance, certification and testing fees, inspections, and allowing for client-specific inclusions, our services provide clients with a transparent and detailed view of costs. The integration of cutting-edge tools further enhances the precision and efficiency of our calculations, empowering businesses with full transparency to make informed decisions and navigate the complexities of international trade with confidence.
Want your own landed cost dashboard? Visit the Supply Chain Shark portal at portal.supplychainshark.com.
