How to Calculate Landed Cost – Complete Formula
Your supplier invoice is not your cost. The product cost is the starting point. By the time goods arrive at your warehouse ready to sell, the true cost includes international freight, insurance, import duty, customs user fees, broker fees, and inland transport. Sellers who build margin models on the invoice price alone consistently underprice products and discover the gap when they check their bank account.
In 2026 the stakes are higher than they have ever been. Average US tariff rates reached 10.2 percent across all imports in March 2026, the highest since the early 1970s. For China-origin goods, effective rates on consumer products commonly exceed 30 to 50 percent when all tariff programs stack. Getting landed cost right is not optional. It is the foundation of every sourcing and pricing decision.
The Complete Landed Cost Formula
Every cost between your supplier’s door and your warehouse dock belongs in this formula.
Landed Cost = Product Cost + International Freight + Insurance + Customs Duty + MPF + HMF + Customs Broker Fee + Drayage + Inland Transport
Each line has a specific source and calculation method. None are optional. Sellers who omit insurance, MPF, or HMF are calculating a number that is reliably lower than reality by a predictable amount.
What each line covers:
Product Cost: What you paid the supplier per the commercial invoice. This is your FOB price if the supplier quotes FOB, or your ex-works price plus origin inland freight if they quote EXW.
International Freight: Cost to move the goods from origin port to destination port. Ocean freight per container or LCL rate. Air freight per kilogram. This is the most variable line item and the one most affected by carrier capacity and seasonality.
Insurance: Cargo insurance for transit risk. Typically 0.3 to 0.5 percent of the CIF value. Some sellers self-insure on low-value shipments but this creates uncovered loss exposure.
Customs Duty: The tariff assessed by CBP on the customs value of the goods. Calculated on CIF value, not FOB value. More on this below.
MPF: Merchandise Processing Fee. 0.3464% of customs value, minimum $33.58, maximum $651.50 per formal entry. Covered in full in the MPF and HMF Fees guide.
HMF: Harbor Maintenance Fee. 0.125% of cargo value. Ocean freight only. No minimum, no maximum.
Customs Broker Fee: Fee charged by your licensed customs broker to prepare and file the entry. Typically $150 to $350 per entry for standard shipments.
Drayage: Trucking from the port container yard to your warehouse or 3PL. Varies by distance and port congestion.
Inland Transport: Any additional movement after drayage to reach your final destination or FBA warehouse.
The CIF vs FOB Mistake That Costs Sellers Real Money
This is the most common landed cost calculation error. Duty is not calculated on your FOB product cost. It is calculated on the CIF value: product cost plus international freight plus insurance.
CBP’s primary valuation method is transaction value under 19 USC 1401a. For most standard imports, customs value equals the CIF value at the US port of entry.
The dollar impact:
Product cost: $20,000 FOB Shanghai
International ocean freight: $2,500
Insurance: $100
CIF value: $22,600
Duty rate: 7.5% (MFN rate for this product)
Duty calculated on FOB: $20,000 × 7.5% = $1,500
Duty calculated on CIF: $22,600 × 7.5% = $1,695
Difference: $195 per shipment. At 12 shipments per year: $2,340 per year in underestimated duty from using FOB instead of CIF as the duty base.
On higher freight cost shipments the gap is larger. A $20,000 product shipping via air freight at $4,000 has a CIF value of $24,000. Duty on CIF is $1,800 versus $1,500 on FOB. That $300 per shipment gap compounds quickly at volume.
Always use CIF value as the duty base. If your supplier quotes FOB, add the freight and insurance costs before calculating duty.
Tariff Stacking in 2026 – Why One Rate Is Never the Whole Story
In 2026, multiple tariff programs can apply simultaneously to the same shipment. The total duty rate is the sum of all applicable rates, not just the MFN base rate.
The tariff stack for a China-origin consumer goods shipment:
MFN duty rate (Column 1 General in the HTS): base rate, varies by product
Section 301 tariff (List 1-4A, China-specific): 7.5% to 25% additional
Section 122 tariff (current 10% across-the-board, pending appeal as of June 2026): additional
Section 232 tariff (steel, aluminum, autos, copper): additional where applicable
A product with 6% MFN duty, subject to Section 301 List 4A (7.5%), and Section 122 (10%) faces a total effective rate of 23.5% on the CIF value. At a $20,000 CIF value, total duty is $4,700.
For non-China origins, the stack is simpler. A Vietnam-origin product with 0% MFN duty may face only IEEPA reciprocal rates, depending on the current status of Section 122 authority.
Tariff rates change frequently in 2026. Section 122 authority was set to expire July 24, 2026, and the legal status of reciprocal tariffs was under appeal as of June 2026. Always verify the current applicable rate for your specific HTS code and origin country before calculating landed cost on a new shipment. The HS Duty Estimator provides estimated duty based on published rates for your HTS code and shipment value. For complex tariff stacks, verify with a licensed customs broker.
Step-by-Step Worked Example
Product: 500 units of kitchen accessories, sourced from Vietnam, shipped by ocean.
FOB price: $18 per unit, $9,000 total
HTS code: Home and Kitchen category, 0% MFN duty rate, Vietnam origin (no Section 301)
International ocean freight: $1,800
Insurance: $90
CIF value: $10,890
Customs broker: $200
Drayage: $350
Inland transport to warehouse: $200
Step 1: Calculate CIF value
$9,000 + $1,800 + $90 = $10,890
Step 2: Calculate duty
$10,890 × 0% = $0 (0% MFN rate, Vietnam origin, no Section 301)
Note: verify current IEEPA/Section 122 rate for Vietnam at time of import
Step 3: Calculate MPF
$10,890 × 0.3464% = $37.72. Above minimum $33.58. Pay $37.72.
Step 4: Calculate HMF (ocean freight)
$10,890 × 0.125% = $13.61
Step 5: Total landed cost
| Line Item | Amount |
|---|---|
| Product cost | $9,000.00 |
| International freight | $1,800.00 |
| Insurance | $90.00 |
| Duty | $0.00 |
| MPF | $37.72 |
| HMF | $13.61 |
| Customs broker fee | $200.00 |
| Drayage | $350.00 |
| Inland transport | $200.00 |
| Total Landed Cost | $11,691.33 |
Step 6: Per unit landed cost
$11,691.33 ÷ 500 units = $23.38 per unit
The product cost per unit was $18.00 FOB. The landed cost per unit is $23.38. That is 29.9 percent above the invoice price. A seller pricing this product at $35 with a mental model of $18 COGS has a very different margin than one who prices knowing the true unit cost is $23.38.
FBA Sellers – Add These Lines to Your Landed Cost
For Amazon FBA sellers, landed cost does not stop at the warehouse door. The cost to get inventory into Amazon’s fulfillment network adds additional lines that belong in the landed cost calculation before comparing to selling price.
FBA landed cost formula:
FBA Landed Cost = Standard Landed Cost + Inbound Shipping to Amazon FBA + Inbound Placement Fee
Using the Vietnam kitchen accessories example above:
Inbound shipping from warehouse to Amazon FBA: $0.50 per unit × 500 = $250
Inbound placement fee (minimal split): $0.50 per unit × 500 = $250
Updated FBA landed cost: $11,691.33 + $250 + $250 = $12,191.33
Per unit FBA landed cost: $12,191.33 ÷ 500 = $24.38
That $24.38 is the true cost basis for the product before Amazon fees and PPC. A selling price of $35 at 15% referral fee ($5.25) and $4.84 FBA fulfillment fee leaves $35 minus $5.25 minus $4.84 minus $24.38 = $0.53 net profit per unit before fuel surcharge, storage, and PPC.
This is why FBA sellers who calculate landed cost without inbound costs consistently think they have more margin than they do. The full FBA fee stack is covered in Amazon FBA Fees Explained 2026.
The Margin Check – When Landed Cost Breaks Your Business
Once you have per unit landed cost, run the margin check before placing a purchase order.
Margin Check = (Selling Price minus Total Fees minus Per Unit Landed Cost) divided by Selling Price
Target margin varies by business model. Most FBA private label sellers target 20 to 30 percent net margin after all Amazon fees and PPC. Direct-to-consumer brands may target different levels depending on customer acquisition cost.
The sourcing breakeven formula:
Maximum Landed Cost = Selling Price × (1 minus Target Margin) minus Total Fees Per Unit
Example: selling price $35, target 25% margin, Amazon fees $10.09 (referral plus fulfillment plus fuel surcharge).
Maximum Landed Cost = $35 × (1 minus 0.25) minus $10.09 = $26.25 minus $10.09 = $16.16
If your per unit landed cost is above $16.16, the product does not hit the margin target at $35 selling price. Either the price needs to increase, the supplier price needs to decrease, or sourcing origin needs to change.
This is the calculation that determines whether a sourcing decision works before any inventory is ordered.
For HTS code lookup and duty rate verification, see the HS Code Finder Guide. For understanding the impact of the de minimis elimination on per-shipment costs, see the Section 321 De Minimis guide.
Rates verified June 19, 2026. See changelog.
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Check My Savings →FAQ
What is the landed cost formula for US importers in 2026?
Landed Cost equals product cost plus international freight plus insurance plus customs duty plus MPF plus HMF (ocean only) plus customs broker fee plus drayage plus inland transport. Duty is calculated on the CIF value (product cost plus freight plus insurance), not the FOB product cost alone. The MPF is 0.3464% of customs value with a minimum of $33.58 and maximum of $651.50. HMF is 0.125% of cargo value on ocean shipments only.
What is the difference between FOB and CIF for duty calculation?
FOB (Free On Board) is the product cost at the origin port before freight and insurance. CIF (Cost, Insurance, Freight) adds international freight and insurance to the FOB price. US CBP calculates duty on the CIF value, not the FOB price. On a $20,000 FOB shipment with $2,500 freight and $100 insurance, duty applies to $22,600, not $20,000. Using FOB as the duty base underestimates duty by the freight and insurance percentage, compounding into significant errors at volume.
How do I calculate per unit landed cost?
Calculate total landed cost for the entire shipment including all freight, duty, MPF, HMF, broker, and transport costs. Divide by the number of units imported. If a 500 unit shipment has a total landed cost of $11,691, per unit landed cost is $23.38. Compare this to your selling price minus all revenue-side fees to determine true per unit margin before placing a purchase order.
How does tariff stacking affect landed cost in 2026?
Multiple tariff programs can apply simultaneously to the same shipment. A China-origin product may face MFN duty plus Section 301 plus Section 122, stacking to 20-50% or higher on the CIF value. Non-China origins typically face lower stacks. Always verify the current total applicable rate for your HTS code and origin country before calculating landed cost. Use the HS Duty Estimator for estimated duty on your specific product and verify with a customs broker for complex tariff situations.