How to calculate landed cost: the formula, line by line

What is landed cost, and why does it matter?

Landed cost is what an imported product really costs you by the time it’s ready to sell. It’s the number you should price from, compare suppliers on and use to decide whether an order is worth placing. The supplier’s unit price is only the starting point; freight, duty, clearance and local charges can add a meaningful amount per unit, and those costs come straight out of your margin if you ignore them.

It also matters for funding. The cash you need for an order is the landed cost plus import GST, paid in stages over weeks or months before the stock sells. Knowing the landed cost is the first step to knowing your funding gap.

What goes into the landed cost formula?

Component	What it includes	Notes
Goods	Supplier invoice value, converted at the rate you paid	Deposit and balance may be at different rates
International freight	Ocean or air freight to Australia	Depends on Incoterms — see below
Cargo insurance	Cover for loss or damage in transit	Sometimes arranged by the seller under CIF or CIP
Customs duty	Rate × customs value	Set by tariff classification and origin
Broker and clearance fees	Declaration, classification, handling	Plus any import processing charge
Port and terminal charges	Terminal handling, documentation, wharf charges	Often several separate items
Local cartage and unpacking	Truck from port, container unpack, return of empty	Sometimes a flat container rate
Other	Inspections, fumigation, storage, labelling	Only when they apply
Finance cost	Estimated total cost of funding the order	Optional, but real

business.gov.au lists GST, customs duty, import processing charges, transport, insurance and storage, customs brokerage, biosecurity and clearance fees, and dumping and countervailing duties among the costs importers may face.

Landed cost = goods + freight + insurance + duty + fees + local charges + finance cost

Landed cost per unit = landed cost ÷ number of units

Why is GST treated differently?

GST on imports is significant — the ABF describes it as 10% of the value of the taxable importation, which is the customs value plus duty plus the cost of transporting and insuring the goods to Australia. It’s generally paid before the goods are released. But a GST-registered business importing for its business can usually claim it back as a credit on its BAS.

So GST belongs in your cash plan, not your cost per unit. Our GST on imported goods page has the detail, and the deferred GST scheme explains how eligible importers avoid paying it at the border.

How do Incoterms change the calculation?

Your Incoterms rule decides which costs are already in the supplier’s price:

• EXW — you pay almost everything from the factory door, including export clearance.
• FOB — the supplier gets goods onto the vessel; you pay ocean freight, insurance and everything after.
• CFR / CIF — the supplier pays ocean freight (and under CIF, minimum insurance); you pay destination charges, duty and GST.
• DDP — the supplier delivers cleared, duty and taxes paid; you pay little more, but it’s built into the price.

Make sure you don’t double-count freight the supplier has already included, or miss destination charges a CIF price doesn’t cover. Our Incoterms guide for importers goes through each.

If your landed cost is clear but the cash to cover it isn’t, you can check whether you qualify for funding in about a minute — no credit check to ask.

How do I allocate shared costs across different products?

When one container holds several products, freight, duty (if rates differ) and local charges need to be spread across them:

• By value — simple, and suits shipments where items are similar in size.
• By volume — best for bulky, light goods where space drives freight cost.
• By weight — best for dense goods, especially on air freight.

Duty should always be calculated per product at its own rate. The other costs can use one method, but be consistent from order to order so your margins are comparable.

Illustrative example

Illustrative only — figures rounded. A homewares importer brings in 2,000 units at a supplier cost of $60,000. Freight is $4,500, insurance $300, duty at an illustrative 5% is $3,000, broker and clearance fees $900, and port and local charges $1,200. Landed cost is $69,900 — about $34.95 a unit, against a supplier price of $30. Import GST of roughly $6,780 is paid at the border too, so the cash out before sales is around $76,700. Try your own numbers in the landed cost calculator.

What changes landed cost between orders?

• Exchange rates — a movement between orders changes the goods cost and the customs value. See exchange-rate timing.
• Freight rates — which can move sharply with demand, fuel and route disruptions.
• Duty — a new free trade agreement, a change in origin or a new anti-dumping measure. See customs duty explained.
• Delays — storage and container charges if goods can’t be cleared or collected. See demurrage and port delays.
• Volume — a fuller container spreads fixed costs over more units.

How landed cost connects to funding

Once you know the landed cost and when each piece is paid, you know how much cash the order needs and for how long. That’s the number to take to a funding conversation. If it’s more than the business can carry comfortably, ask Trade Loan what’s possible — the enquiry takes about a minute, with no credit check, and it goes to a real person rather than a list of lenders. Please enter the order value and timing accurately so we can suggest the right option first time. Our container landed-cost walkthrough follows a complete order step by step if you’d like to see it in practice.