What landed cost means for a small retailer, and how to work it out

What is landed cost, exactly?

Landed cost is the total amount you spend to own one unit of a product at the point where you can actually sell it or use it. It covers every dollar between the factory and your shelves: the price you paid for the goods, the cost to move them, any taxes or duties the government collects along the way, and any fees charged to clear them through customs.

The phrase comes from shipping: the cost at which goods “land” in your country. Once they are landed, you take responsibility and the selling process can begin.

For a retailer buying domestically, the math is simple: wholesale price plus shipping from the supplier. For a retailer buying imported goods, or buying from a US importer who has done the importing for you, understanding what is already baked into the price you see, and what is not, determines whether your margins hold up.

Why do retailers get this wrong?

The most common mistake is comparing a factory price or a cheap-looking Alibaba quote to a fully-priced US wholesale item and concluding the domestic source is overpriced. The factory price is the starting point, not the ending point.

Here is an illustrative example using made-up numbers to show every line. These are not Tally Wholesale’s prices. They are a generic example of how the calculation works.

Example: a $2.00 factory price becomes something else entirely

Assume a small gift shop is looking at a decorative item. A factory on Alibaba lists it at $2.00 per unit with a 500-unit MOQ.

Cost component	Per-unit amount	Notes
Factory price	$2.00	FOB factory gate; does not include anything below
Ocean freight (LCL)	$0.55	Estimated for a less-than-container load; varies by volume and route
Insurance	$0.04	Optional; assumed at 2% of the factory price for this example
Origin charges (stuffing, handling)	$0.08	Charged by the freight forwarder at the origin port
Destination port fees	$0.10	Varies by port
Customs broker fee	$0.15	Assumed flat fee per entry for this example, spread across units
Merchandise Processing Fee (MPF)	$0.07	0.3464% of cargo value, but the $33.58 minimum per entry applies at this order size (spread over 500 units) (FY2026 rate per Federal Register CBP-DEC-25-10)
Harbor Maintenance Fee (HMF)	$0.01	0.125% of commercial cargo value on ocean shipments (CBP User Fee Table)
Import duty	$0.40	Illustrative; actual rate depends on HTS code and country of origin
Drayage to warehouse	$0.12	Trucking from port to your facility or 3PL
Total landed cost	$3.52	76% above the factory price

That $2.00 item costs $3.52 to land. If a US importer quotes the same item at $3.20, the US source is actually cheaper, and you do not have to manage the logistics, the customs broker, or the minimum order.

The duty line is illustrative in the example above because actual rates depend on the product’s HTS code and country of origin. Rates are often layered: a base MFN rate set by the Harmonized Tariff Schedule, plus any additional duties that apply to goods from certain countries, such as Section 301 tariffs. Those rates have changed substantially in 2025 and 2026 and vary widely by product. A customs broker can classify a specific product and confirm the current rate.

What is the difference between FOB, CIF, and DDP pricing?

When you see a price quote from a factory or freight forwarder, the terms next to the number tell you what is and is not included. These terms come from the Incoterms standard used in international trade.

FOB (Free on Board): The seller’s responsibility ends when the goods are loaded onto the ship at the origin port. You, the buyer, pay for ocean freight, insurance, destination port fees, customs clearance, duties, and delivery to your door. Most Alibaba factory quotes are FOB.

CIF (Cost, Insurance, and Freight): The seller pays for the goods, insurance, and ocean freight to the destination port. Everything after that, port fees, customs duties, and delivery, is yours.

DDP (Delivered Duty Paid): The seller pays for everything, all the way to your door. This is the closest thing to a true landed cost quote. When a US importer quotes you a price per unit, they are effectively quoting DDP.

The same product at a lower FOB price than a DDP quote is not necessarily cheaper. Add every cost below the FOB line before you compare them.

How do I calculate landed cost for a product I want to buy?

If you are buying from a US importer that quotes a landed price, your calculation is simple: the landed price per unit is your true cost. Verify what the price includes (freight, duties, delivery) before assuming.

If you are importing directly and building your own cost model, work through these steps.

1. Get the factory price (per unit, at your anticipated quantity).
2. Request a freight quote from a forwarder for your shipment volume and destination. Get both ocean and air quotes so you understand the time-cost trade-off.
3. Estimate duties. Find the HTS code for your product (the USITC Harmonized Tariff Schedule is the official source). A customs broker can confirm the code and the applicable rate, including any additional duties based on country of origin.
4. Add the MPF (0.3464% of value, min $33.58, max $651.50 per entry for FY2026) and HMF (0.125% of commercial cargo value on ocean shipments). Divide by units in the shipment to get a per-unit number.
5. Add the customs broker fee, divided by units.
6. Add destination drayage and any warehousing or handling.

Divide the total by your unit count. That is your landed cost.

How does landed cost connect to your retail pricing?

Most retailers use a markup or margin target. A keystone markup doubles the cost: a $4.50 landed cost becomes a $9.00 retail price. Some categories carry higher markups; specialty pet goods, home decor, and gift items commonly run 2.5x to 3x.

The landed cost is the only number that lets you set a price confidently. A retailer who prices off the factory quote and learns later about the duty bill is repricing mid-season or eating the margin.

When Tally Wholesale gives you a price, it is a landed price: freight and duties are already accounted for. You can go straight from our number to your margin calculation. That is the point of a landed price: to give you one number you can plan around.