How to calculate landed cost when importing from China

Landed cost is the true, all-in cost of an imported product once it reaches your warehouse. It is the only number that tells you whether a product is actually profitable. For a first-time importer, the factory price is typically only 60–70% of the final landed cost — so deciding on the FOB quote alone means being wrong by 30–50%. Here is the complete formula, the by-CBM allocation method, and a fully worked China → France/US example.

The vocabulary you need first

Before the formula, four acronyms come up constantly. Two are Incoterms (the international rules that set who pays what, and where risk passes from seller to buyer); two are units of calculation:

• FOB (Free On Board): the "goods loaded on the vessel at the Chinese port" price. From that point on, everything is on you. It's the most common Incoterm in sourcing.
• CIF (Cost, Insurance and Freight): FOB value + ocean freight + insurance to the destination port. In the EU, it is the base on which customs duties are charged (IncoDocs).
• CBM (cubic meter): volume. A container fills by volume, not weight, for most consumer goods.
• HS code (Harmonized System): the 6–10 digit customs classification that sets your duty rate. The wrong code means the wrong rate.

The complete formula

Landed cost is built line by line. For one order line:

Unit landed cost =
    Unit FOB price
  + (Ocean freight + THC + port charges) × (line CBM / total CBM)
  + Insurance (≈ 0.2–0.5% of CIF value)
  + Customs duties       [base: CIF value × HS-code rate]
  + Import VAT           [EU base: (CIF + duties) × country VAT rate]
  + Clearance + inland transport + brokerage × CBM share
  + Bank & FX fees (wire + FX spread)
    ─────────────────────────────────────────────
  ÷ Line quantity

Then margin follows from the target sale price:

Margin = (Target sale price − Landed cost) / Target sale price

Two things trip people up. In the EU, customs charges duty on the CIF value (goods + freight + insurance), not on FOB alone (IncoDocs). And import VAT is calculated on CIF + duty — so you pay VAT on the duty itself (trade-cost.com).

Allocation by CBM

Freight and the container's fixed costs (THC, port fees, clearance) are a shared cost: they attach to the whole container, not to one line. They have to be spread. The default method is pro rata to each line's volume (CBM).

The logic: a bulky product "consumes" more container than a dense one. A carton of cushions and a carton of screws don't take the same space, so the cushions must carry a larger share of freight. You can also allocate by value (expensive lines absorb more) or by weight for dense cargo, but CBM is the standard for FCL imports. To estimate total volume and container fill first, our CBM calculator does it carton by carton.

Worked example: 2,000 LED desk lamps

Take a real line: 2,000 LED desk lamps, FOB $8.50/unit, 10 units per carton, 0.06 m³ carton. That's 200 cartons and 12 CBM. The container (20ft, ~24 CBM loaded) costs $2,400 all-in for freight + THC + port → $100/CBM. This line therefore carries 12 × 100 = $1,200 of freight.

Below, the same order cleared in France (EU) versus the United States, where both the customs base and the taxes differ sharply:

¹ Import VAT is recoverable for a VAT-registered EU business (reverse-charged on the CA3 return in France since 2022, trade-cost.com): it's a cash-flow cost, not a margin cost. For a non-registered buyer it is a real +20%.

The reading is clear: on the US side, the factory goods drop to just 72% of landed cost — squarely inside the 60–70% band documented for first-time importers (Corporate Alliance, TariffsTool). Here the gap is driven by US tariffs; on the EU side (VAT-registered), the real gap is smaller (+12% ex-VAT) because VAT is reclaimed and the duty on luminaires is low. Switch products — textiles, footwear, kitchenware at 6–17% duty — and the EU climbs fast too. Our landed-cost calculator applies your own rates line by line.

EU / France vs United States: where it diverges

Three structural differences you must never mix up:

The duty base

The EU taxes CIF value (goods + freight + insurance) (trade-cost.com). The US taxes FOB transaction value (ocean freight declared separately is excluded from the base). At the same rate, the US base is lower — but the rates are much higher.

Indirect taxes

The EU adds import VAT (20% in France, on CIF + duty), usually recoverable for a business. The US has no federal VAT at the border: state sales tax is collected on resale, not at import. Instead, US-specific fees apply: MPF (Merchandise Processing Fee, 0.3464% of customs value) and HMF (Harbor Maintenance Fee, 0.125% for ocean freight).

China → US surcharges

Since 2025, Chinese imports into the US carry Section 301 duties (generally 7.5% to 25% depending on the list, with higher peaks on strategic goods), and the sub-$800 de minimis exemption was removed for China on 2 May 2025 (TariffsTool, New Buying Agent). On the EU side, the sub-€150 low-value exemption ended on 1 July 2026, replaced transitionally by a flat few-euro duty per parcel (Bird & Bird). Always check the current rate for your HS code — these rules move fast.

Set it once, reuse it every order

Rates (duty by HS code, country VAT, logistics cost by route) are stable order to order for the same flow. Best practice: build a reusable cost library — route Shenzhen → your port, rates by HS code, your bank spread — and apply it automatically. You go from a FOB price scribbled at the booth to a reliable landed cost in seconds, and you decide on the right number. It's also what lets you compare two suppliers on equal footing: see from photo to purchase order.

FAQ

What's the difference between landed cost and FOB price?

FOB is the "goods loaded on the vessel in China" price. Landed cost adds everything after that: freight, insurance, customs duties, VAT, clearance, inland transport, bank fees. Depending on the product and country, landed cost runs 15–55% above FOB. It is the only figure to compute a margin on — never the FOB quote alone.

Are customs duties calculated on FOB or CIF?

In the European Union, on the CIF value: goods + freight + insurance to the destination port. In the United States, on the FOB transaction value (ocean freight declared separately is excluded). The rate depends on your HS code. EU import VAT, separately, is calculated on CIF + duty.

Why allocate freight by CBM rather than by value?

Because a container fills by volume. A bulky product takes more space and must carry a larger share of freight, regardless of its price. CBM allocation reflects the real use of the container. Value-based allocation still makes sense when your shared costs depend mostly on amount (insurance, financing) rather than volume.

Is the factory price really only 60–70% of the final cost?

That's the documented band for first-time importers (Corporate Alliance). It rises to 70–80% for seasoned importers who have optimized freight and clearance. It depends mostly on the duty rate, container fill, and destination country — which is why you calculate rather than guess.

Is import VAT a real cost?

For a VAT-registered EU business, no: it is recoverable (reverse-charged on the VAT return), so it's a timing/cash-flow item, not a margin cost. For an individual or non-registered entity, yes — it's a real +20% (in France) to build into landed cost. In the United States there is no VAT at the border at all.

At a trade show you note an FOB price in 10 seconds; the real work starts afterward. Fairloop computes landed cost line by line on your container order, with CBM allocation and your own duty, VAT and FX rates — so you decide on the right number, not on FOB. See pricing.

Read also: the beginner's guide to China sourcing.