How do you calculate landed costs?

How do you determine the true costs of product that you're importing/exporting?

Alfonso Llanes, Master Degree in International Development

Written just now

Definition

Landed cost of merchandise is the total cost of the product form origin to destination after the shipment has cleared Customs at the port of entry and all inter-modal transportation, tariffs, taxes, insurance and fees have been accounted for the total or landed cost of the merchandise.

There are however several variations of a typical outlined shipment described in a sales terms and delivery contracts. i.e., Point-to-point costing, Free on Board (FOB) Cost Insurance and Freight (CIF) Free Along Side (FAS) etc.

Once the contract of sale and delivery are completed a pro-forma invoice should follow listing all the components of an ordinary domestic invoice as a pre-shipment formal quote price: It should include a description of the product, and packaging the itemized listing of charges and sales terms. For example two boxes of toys priced at $100 per unit. Total cost for the order is $200 at factory.

Pre-shiment selling price: $200 in U.S. Dollars

Inland transport both ends: $15

Ocean transport: $25

Duty: $2

Fees: $3

TOTAL LANDED PRICE: $245.00

This amount should be used as the pro-forma quotation for invoicing the buyer. Once such amount is entered no additional changes should be made to the transaction by anyone during the duration of the contract period and before the expiration date of the sales contract. The terms of payment must have also been agreed prior to delivery and before the Bill Of Lading and invoice can be presented to the receiving bank for payment of the merchandise. if such terms of payment were negotiated using a conditional letter of credit from an issuing bank, all stipulations stated in such letter of credit must be met before the release of payment is made.