How to Calculate Landed Cost from China (Formula + Example)

Agents & Fees · 2026 · 8 min read

Landed cost is the total cost of getting one sellable unit from a Chinese factory to your door, and it is the only number that decides whether a product makes money. The factory price alone tells you almost nothing: importers who price from the unit cost routinely discover their real margin after the money is spent. This guide gives you the landed cost formula, a worked example with realistic numbers, and the line items most first-time importers forget.

The formula in one line: landed cost per unit = (product cost + freight + duties and taxes + inspection and compliance + service fees + inbound handling) ?? sellable units. The last phrase matters: you divide by units you can actually sell, which means subtracting your defect allowance.

What goes into landed cost, line by line?

1. Product cost

The factory price at your volume, on agreed terms (EXW, FOB or DDP). Two habits keep this number honest: benchmark it against at least three factories, and confirm what the price includes, because a price without terms hides the freight and duty lines you will pay anyway. Our guide to 1688 vs Alibaba pricing shows how much this line can move between channels for the same goods.

2. Inbound freight

Sea, air, rail or express, chosen by deadline and volume. For planning, use these behaviors: sea is the cheapest per unit and slowest; air costs a multiple of sea; express is the simplest and most expensive per kilogram. Volumetric weight bills bulky-light goods by size, not weight. The mode-by-mode numbers are in our shipping comparison guide.

3. Duties and taxes

Duty = declared value ? the rate for your product’s HS code in the destination market, plus VAT or sales tax in most countries, plus possible additional tariffs (for US imports from China, check Section 301 exposure on your code). Classification drives the bill: adjacent HS codes can differ by double-digit percentages, which is why we treat correct classification as a cost line, not paperwork. Our HS code and duties guide walks the lookup.

4. Inspection and compliance

Pre-shipment inspection (a flat few hundred dollars per man-day), any product testing your category requires, and for first orders a factory audit. These lines are small against the order value and prevent the two most expensive failures: defective stock and non-compliant stock.

5. Service fees

If you work with a sourcing agent, the fee covers verification, negotiation, order management and shipping coordination. Published commissions slide down with order value; at our own pricing, full-service commission is 5–8%. What matters when comparing any agent is the landed total, not the percentage: the mechanics are in sourcing commissions explained.

6. Inbound handling and last-mile

Delivery from port to your warehouse or fulfillment center, unloading, and for Amazon sellers the FBA check-in. DDP quotes bundle most of this; FOB quotes leave it to you. Never compare quotes with different terms side by side.

What does 1,000 units by sea really cost?

Line	Amount
Product: 1,000 pcs @ $2.00 (FOB)	$2,000
Sea freight, consolidated share	$400
Duty (7% of ~$2,400) + clearance	$210
Pre-shipment inspection	$280
Agent fee (8% of product cost)	$160
Delivery to warehouse	$90
Total	$3,140

Divide by sellable units: at a 2% defect allowance, 980 sellable units gives a landed cost of about $3.20 per unit, against a factory price of $2.00. That is a 60% uplift, and it is normal. As a planning shortcut, multiply FOB by 1.3?1.6 and pressure-test the result against this breakdown.

Which cost lines do importers forget?

• Defect allowance: even with inspection, plan 1?3% of units as unsellable and spread their cost across the rest.
• Payment costs: transfer fees, currency conversion, and payment-platform percentages.
• Storage: warehouse time between production and shipment, or FBA storage fees after arrival.
• Returns and refusals: for e-commerce, a per-order returns provision belongs in the unit economics.
• Re-inspection after a failed lot: the rework is usually free under contract terms, the second inspection is not.

What does each cost line usually cost?

Exact numbers depend on your product and route, but new importers ask for ranges, not formulas. The table below shows where each line typically lands for a mid-size order, expressed as a share of your FOB product cost, so you can sanity-check any quote in minutes. If a line lands far outside these ranges, that is not automatically wrong, but it deserves a question before you wire money.

Cost line	Typical share of product cost	What moves it
Product cost, FOB	Baseline	Specification, order size, negotiation
Sea freight, full container	4 to 10 percent	Route, season, fuel, booking timing
Air or express freight	25 to 60 percent	Weight and urgency, samples and top-ups only
Duty and taxes	0 to 25 percent plus	HS code, origin, Section 301 coverage
Inspection and compliance	1 to 3 percent	Number of checkpoints, lab tests needed
Sourcing agent fee	5 to 10 percent	Scope of service, order size
Warehousing and last mile	2 to 6 percent	Consolidation, destination, FBA vs own warehouse

Two habits make this table useful instead of decorative. First, update it per order: freight and duty move, product cost moves with volume, and last quarter’s spreadsheet lies about this quarter’s margin. Second, track every line in the same currency and the same accounting period, because mixing USD quotes with RMB invoices is how silent losses happen. Duty depends on your HS code, so lock that classification down before you trust the duty line at all.

How do tooling and mold fees change your unit cost?

Custom or semi-custom products usually need tooling before mass production starts. A simple plastic part might need a $1,500 mold, while a complex consumer device can run $10,000 to $20,000 or more. Factories present this in two ways: either you pay the mold fee as a separate line, or they amortize it into the unit price across a promised order quantity. Both are legitimate, but they are not the same deal.

Amortized tooling looks cheaper and hides two problems. If you never reach the promised quantity, the factory reprices the units retroactively or refuses the next order at the old price. And if you do not own the mold, you cannot take it to a second factory if prices rise or quality slips. The stronger position, especially for products you plan to sell long-term, is paying the tooling upfront and writing ownership into the proforma invoice: the mold is your property, it carries your identification number, and it can be released to another factory on request. Get photos of the mold and its storage location on file. Repeat importers treat the mold register like an asset list, because that is exactly what it is.

How do you price backward from landed cost?

Landed cost is an input to your price, not the price itself. Working backward from what the market will pay keeps you honest: decide the realistic retail price, subtract the channel’s take, and see whether your landed cost leaves a margin worth the work. On Amazon, referral fees run around 15 percent of the sale price and FBA fulfillment commonly absorbs another 30 to 40 percent between storage, pick-pack, and inbound. A product that retails at $25 returns roughly $11 to $12 before advertising. If your landed cost is $9, one ad click can erase the month.

That is why experienced importers price against a multiple, not a percentage. A common rule is a 3x multiple between landed cost and retail price on Amazon, and 2.5x in traditional retail where you sell through a distributor. Build two more allowances into the model before you commit: an exchange-rate buffer of 3 to 5 percent, because quotes and payments sit days or weeks apart, and a defect allowance around 2 percent even with good inspection, because AQL standards tolerate some minors by design. If the multiple does not survive those deductions, the product needs a better specification, a cheaper classification, a lighter shipment plan, or a different market. The Incoterms guide and the payment terms guide both show levers that move the landed cost before you ever touch the supplier’s price.

How do air freight and sea freight compare in the same model?

Air and sea are not just two prices for the same service, they are two different cash-flow machines. Air freight costs 25 to 60 percent of product value but lands in 5 to 10 days, which means your money comes back in weeks and you can react to real sales data with a bigger sea order. Sea freight costs a fraction per unit but ties up your cash for 35 to 45 days door to door on the US West Coast, longer to the East Coast or Europe. New importers burn money by choosing sea for a first order of an unproven product, then paying again for air on a second order three weeks later because the first one sold. The sharper play is a small air batch to validate demand and a sea order placed from the same production run to restock. Your inspection checkpoints apply identically to both, so quality is not the trade-off you are making when you choose speed.

FAQ

Is landed cost the same as COGS?

COGS usually means product cost alone. Landed cost is the honest version: everything spent to make one unit sellable at your market. Price from landed cost.

How much does freight add per unit?

It collapses with volume: small air shipments can add $2?4 per unit, full-container sea freight can add cents. Quote per shipment, at your real volume and carton size.

What percentage should duties be?

There is no single number: rates run from zero to double digits by product and market. Look up your HS code first; the rate follows from it, not from a rule of thumb.

Should I use DDP quotes to simplify the math?

DDP makes the freight-duty-handling lines one number, which is convenient and comparable. Just confirm what the DDP price includes, because exclusions appear at the border.

Related guides

• How to import from China: the complete 2027 guide
• Sourcing agent commissions explained
• HS codes and customs duties guide
• Incoterms explained: EXW, FOB, DDP

Written by the Yinhan Sourcing team in Shenzhen: we build landed-cost models for client orders before the deposit, not after.