Your total import cost (landed cost) includes everything – from the factory price in China to the moment the goods arrive in your warehouse. Without this number, you can’t realistically judge whether an import is profitable.
Why you must calculate your landed cost
Many importers look only at the factory price and forget about freight, customs, taxes, and local charges. A full cost breakdown shows whether your margins are actually healthy and gives you a solid basis for negotiating with suppliers and freight forwarders.
If, after running the numbers, you see that your margin is only a few percent, it’s a clear sign that something is off in your pricing or cost structure – and that you need to adjust your terms or even switch products.
What’s included in your total import cost
Your landed cost is the total of all expenses from the factory gate to your warehouse door. It’s the only number that really matters when you’re deciding whether an import project makes sense.
To calculate it properly, you’ll need at least:
- A detailed quote from your Chinese supplier (Incoterm, port, product specs, price, packaging dimensions).
- A quote from your freight forwarder and customs broker (freight, local charges, duty rate, VAT).
- Your real FX costs and any bank fees related to currency exchange.
Landed cost formula
To keep things simple, let’s assume you’re buying under FOB terms (Free on Board) – which is the standard Incoterm most importers use when buying from China. You can read more about FOB and other Incoterms in our guide Shipping from China.
Basic formula:
Purchase price + international freight + local charges + customs duties + taxes
Purchase price
Factory prices for your products, plus any quality inspection costs and, if needed, lab testing fees.
Freight costs
Inland trucking in China (if you’re buying EXW) plus sea or air freight. These rates vary a lot depending on the season, route, and shipping method.
Local charges
Port charges, documentation fees, customs clearance, inspection or quarantine fees, insurance, and domestic trucking to your warehouse. Your forwarder can give you estimates for these items.
Customs duties
The duty rate is determined by the HS code of your product. The HS (Harmonized System) is a global classification system used to categorize all products in international trade. You can get a suggested code from your supplier or look it up on your customs authority’s website; once you share it with your forwarder, they can confirm the exact duty rate that applies.
Taxes (VAT)
You need to know which taxes apply in your country and how they’re calculated on imports. Don’t forget last‑mile delivery costs to your end customers (if you’re selling online) and your warehousing costs.
Practical example
Let’s assume the following:
- Goods value: 10,000 USD (FOB)
- Freight cost: 1,000 USD
- Duty rate on the product: 5%
- VAT rate: 20%
Calculation:
- Goods value (FOB): 10,000 USD
- Freight: 1,000 USD
- CIF value: 11,000 USD
- Duty (5% of CIF): 550 USD
- VAT base (CIF + duty): 11,550 USD
- VAT (20%): 2,310 USD
- Total landed cost: 13,860 USD
This example shows how a factory price of 10,000 USD can easily grow by almost 40% once you add freight, duties, and taxes. That’s why you should always run a detailed cost calculation before committing to any supplier.
Why MOQ is a bad way to judge profitability
A very common beginner mistake is to judge profitability based on the factory’s MOQ (Minimum Order Quantity) – the smallest number of units they’re willing to produce. That’s the wrong way to look at it.
Freight and quality control costs drop per unit as your order volume increases. If you base your decision only on a small “test order” at MOQ level, you might reject a product that would be perfectly profitable at your normal, long‑term order quantity.
The better approach: always calculate costs based on your planned regular order quantity, not on MOQ.
Need help calculating your landed costs? Get in touch with us.
Frequently asked questions about import costs from China
What is landed cost and why is it so important?
Landed cost is the total cost of importing – from the factory price to the moment the goods arrive in your warehouse. It includes purchase price, freight, port and handling fees, customs duties, VAT, and local charges. Without this number, you can’t realistically assess profitability.
Which Incoterm is best for importing from China?
The most common and straightforward option is FOB (Free on Board). The factory handles delivery to the port in China, and you arrange the international freight. For most importers, FOB is the easiest to understand and to plug into cost calculations.
How do I calculate customs duty and VAT when importing from China?
First, calculate the CIF value = goods value + freight + port charges (where applicable). Duty is calculated as a percentage of CIF (for example, 5% of CIF). VAT is then calculated on the base = CIF + duty (for example, 20% of that sum).
Can I judge profitability based on the factory’s MOQ?
No. MOQ is simply the smallest batch the factory is willing to produce, but freight and quality control costs per unit drop significantly as quantities go up. Always base your calculations on your expected regular order quantity, not on MOQ alone.
What if my margin is only a few percent after I calculate landed cost?
That’s a red flag. It usually means your price or cost structure isn’t sustainable – you may need to renegotiate terms (for example, different Incoterm, another port, or another supplier), adjust the product, or increase your order size. Doing this math before you commit to the supplier helps you avoid expensive mistakes.
Customs Guide
Customs clearance and documentation for imports from China
In this guide, we walk you through the customs process step by step – from the essential paperwork to a real-world duty and VAT calculation.
Customs clearance basics
A simple explanation of duties and the CIF value, an overview of import duty levels for Chinese products, and useful links to customs tariff databases by country.
HS codes for imports from China – practical guide
What HS codes are, how to find the correct code for your product, how they affect duty rates, and why misclassification can lead to delays and extra costs.
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