Calculating Landing Costs When Choosing to Import from China

As a business and importer, choosing goods that have a high-profit yield is a priority. Products that can sell locally and online always make a good profit. Made-in-China products are sure to be good for your importing business; however, as many flocks to China-made goods, many fail to see the bigger picture. Most fail to make a profit from their imports because they were only concerned with the prices of the products they choose to import but neglect the charges they will incur during importation. So, how much is the landing cost when importing goods from China?

The first step is to locate a reputable supplier and get a quotation. Remember to calculate landing costs before you begin importing products. By doing so, you won’t have to go through all the trouble of importing and making less profit due to the unexpected expenses.

People often look for simple formulas, templates, or instant calculators for their first import calculations. Unfortunately, there is none we can turn to. Calculating landing costs is complicated and includes dozens of variables and factors.

After fully understanding the principles we will be discussing, focus on a small quantity trial order as a best practice. This should allow you to have a glimpse of how importing costs without putting too much of your assets at risk.

Landed Costs, What is it?

Before we begin to calculate the landed cost of importing, we must first understand what landed cost is. Simply put, it is the total cost of a product to be paid. It encompasses the expenses of transporting goods or products from the manufacturer or seller’s warehouse to the buyer’s facilities.

Landed cost comprises of the inspection charges, the original price of the items, brokerage and logistics fees, customs duties, tariffs, total shipping costs, taxes, insurance, crating costs, bank charges, currency conversion, and handling fees. Although not all components are present every shipment, they must be considered as a part of the total cost of products.

Use this comprehensive chart as your calculations formula.

The International Commercial Terms 2010

The terms of trade between buyer and seller should be cited on the Proforma Invoice or Quote Sheet. The Incoterms rules are primarily intended to communicate the tasks, risks, and costs of transportation and delivery of products.

As an example,

EXW, means the buyer shoulders for everything in transport.

DDP, means the seller shoulders everything in transport.

Landed Cost = EXW/FOB + To-Door Freight + Customs Fees

  • To-Door Freight expenses are to be paid by the freight forwarder,
  • EXW/FOB are to be shouldered by seller/ supplier
  • Customs Fees are paid to the customs via customs broker

Why EXW or FOB

Opting for DDP or DAP means you do not have to do any calculations by yourself. However, the downside is that a considerable amount of money will easily slip away. Most suppliers are unable to quote the DDP price, which for most cases cannot be determined at the beginning of the transactions. 

This is the reason why most if not all importers prefer FOB, which lets the suppliers handle all internal transport to the nearer ports or airport, bear local charges, and prepare customs documents for exporting.

For small quantity orders, it is better to use EXW.

By doing so you can handle the rest by working with your customs broker or freight forwarder—You may get a freight quote from FOB to your door for a clearer picture of expenses.