Landed cost: the true price of imported stock

What goes into landed cost

• The supplier's price, in the currency you bought in, at the rate on the day.
• Freight and shipping to the border and on to your warehouse.
• Customs duty and surtax, as assessed on the Bill of Entry.
• Clearing and forwarding fees.
• Insurance and any other cost of getting the goods to you.

VAT paid at customs is usually not part of the cost: a VAT-registered importer claims it back as input tax.

Sharing the charges across the goods

A shipment usually carries many products, so each charge has to be shared out. The common ways are by value, by quantity, or by weight; heavy, cheap goods often deserve more of the freight than value alone would give them. Choose a method with your accountant and use it consistently.

What it changes

• Stock is valued at what it really cost, so the balance sheet is right.
• Cost of sales, and so gross profit and margin, reflect the true cost.
• Prices can be set from the real cost per unit, kilogram or pack.
• You can compare suppliers and routes on landed cost, not invoice price.

Following a shipment

From the order to the shelf, a shipment passes through stages: deposit, departure, the border, clearing and receipt. Knowing what is where, and when it is expected, lets you promise stock to customers and plan payments to suppliers.