Landed Cost: Formula and a Real Amazon FBA Example

The factory price is the number every supplier conversation is about, and it is the number most new sellers plan with. But it is not what a unit costs you. By the time a unit is in the US and ready to go to Amazon, you have also paid to ship it, to clear it through customs and to pay the duty on it. That full figure is the landed cost, and it is the right starting point for every margin calculation.

The landed cost formula

For one unit:

Landed cost = factory price + freight + base duty + extra tariffs + MPF + HMF + import services

• Factory price: what you pay the supplier per unit.
• Freight: the shipment's freight bill divided by the number of units. Our LCL vs FCL post shows how much this moves with volume.
• Base duty and extra tariffs: percentages of the customs value, usually the factory price. Our post on import duty from China shows how to work them out.
• MPF and HMF: the two customs fees, the Merchandise Processing Fee and the Harbor Maintenance Fee.
• Import services: the customs broker's entry filing, the customs bond, cargo insurance and similar charges. Most are a fixed amount per shipment, so the cost per unit depends on how many units share it.

Amazon's fees are not part of the landed cost. They come out of the selling price afterwards, and we add them in the second example below.

Worked example 1: a $27.99 product, 500 units

This is a Cap Engine calculation for one of our test products, a kitchen appliance made in China, shipped by sea in a shared container. It is an example, not a quote.

The factory price is $5.60, and the landed cost is $10.70: almost twice as much. Freight is the biggest addition, then the import services, then the China tariff. If you plan your margin on the factory price, you are planning on roughly half of what each unit really costs before Amazon takes anything.

Why the landed cost changes with order size

Several lines in the formula are fixed per shipment: most of the import services, and the MPF when its minimum applies. Spread over more units they cost less per unit. Freight changes too, but not always downwards. Here is the same product at 1,000 and 2,000 units, again a Cap Engine example.

At 1,000 units the landed cost drops to $9.40: the import services per unit roughly halve and the shared-container freight is cheaper per unit. At 2,000 units it rises again to $9.84, even though the factory price and the import services keep falling. The reason is freight: at that size the shipment goes in its own 20-foot container, and the container is not full. The cheapest order size per unit is not always the biggest one, so work out the landed cost at more than one order size before you commit.

Worked example 2: from landed cost to profit on Amazon

Landed cost tells you what a unit costs. To see whether the product makes money on Amazon, take it away from the selling price along with Amazon's fees and your advertising. The first example has no box size, so Amazon's fulfilment fee cannot be priced for it. This second Cap Engine example, a bamboo cutting board selling at $49.88, has every line.

Two things stand out. First, this order is large, 5,724 units, so the freight and the import services are small per unit: less than $0.70 together. On a 500-unit order the same charges would weigh far more. Second, Amazon's fees and advertising together are bigger than the landed cost. The landed cost is where the margin calculation starts, not where it ends.

What is not in the landed cost

Some costs are easy to forget because they do not appear on the supplier's or the forwarder's invoice:

• Prep and labelling by your supplier or a prep centre, if you need it.
• Amazon's inbound placement fee and storage fees, which come out of profit rather than the landed cost.
• Samples, inspections and certificates before the first order.

None of these is large on its own, but together they can move a thin margin. Budget for them separately so they do not surprise you.

How to work out your own landed cost

1. Get a factory price for the order size you plan, and the carton size and weight.
2. Get an all-in freight quote for that volume, door to door, and divide it by the units.
3. Find the duty rate and any extra China tariff with the free import duty checker, and apply it to the factory price.
4. Add the MPF and HMF, then the customs broker, bond and insurance, divided by the units.
5. Repeat for a second order size. If the landed cost moves a lot, the order size matters as much as the factory price.

The short version

Landed cost is the factory price plus freight, duty, tariffs, the two customs fees and import services, per unit. In our example a $5.60 factory price landed at $10.70 on 500 units and $9.40 on 1,000. Plan your margin on the landed cost, and then take Amazon's fees and advertising away from the selling price.