Knowing Your True Landed Costs

So many people get into international trade and do not understand the importance of landed costs or total costs including international shipping, customs duty percentages and insurance. They assume that guessing their costs would be the same as figuring out the true landed cost because they only want an estimate. Unless a person has been in the same business with the same costs for multiple years, this kind of blind estimating can cost your company money. The worst part of this is that it is a lot of money that will not be realized until the bills are paid and your cash is already gone. This is the reason 3PL companies and consulting companies will ask their business partners to get on a new computer system. Many times the systems that are being used are not capturing all of the true costs of the material being shipped. If you are not capturing all of these costs, you may be spending more than you realize.

Finding out your landed costs can be easily calculated by adding the freight shipping rates, actual duties paid, insurance costs and logistics costs together and divide to get the cost per piece. Add that number to your product costs and this is your landed cost. Sometimes it could be as low as 6% up from your product cost, but it could also be as high as 40%. This is a big difference. If you are not capturing all costs involved between the factory and your warehouse, you are not calculating a true landed cost for your item. If you are not calculating the true landed costs, you could be spending a much higher amount on your product than you thought. To some this all may seem remedial, but to many companies, this could be the way they stay in business going forward. In this economy, every penny counts.