Landed cost formula
Landed cost per unit is the total of the goods, shipping, insurance, duty and fees divided by the number of units, so every cost of importing ends up inside the cost of each item you sell.
For the IRS, freight-in on merchandise you buy for sale is part of cost of goods sold, so the margin you report is based on landed cost, not on the invoice.[8]
What goes into landed cost
Seven items make up a typical import; which ones apply depends on the shipping terms you buy on and the country you import into.
| Cost | Charged by | How it is worked out |
|---|---|---|
| Goods | Supplier | Units × price on the commercial invoice |
| International freight | Carrier or forwarder | Per container, pallet, kilogram or parcel |
| Cargo insurance | Insurer or forwarder | Usually a small % of the insured value |
| Customs duty | Customs (CBP in the U.S.) | Duty rate for the product's tariff code × customs value |
| Customs user fees | CBP | U.S.: MPF on formal entries, HMF on ocean cargo |
| Customs broker | Licensed broker | Flat fee per entry, plus bond and extras |
| Delivery to you | Trucker or courier | Port or airport to your warehouse |
Under FOB or EXW terms you pay the freight and insurance yourself; under CIF or DDP the supplier includes some of them in the invoice price. Either way they belong in landed cost, just not twice.
Customs value: goods only in the U.S., plus freight in the EU and UK
U.S. duty is charged on the price paid for the goods, which by regulation excludes the cost of transport and insurance for the international shipment.[1] The European Union adds transport and insurance up to the point where the goods enter the EU to the customs value, so the same duty rate costs more there.[5] The UK does the same: transport and insurance up to the UK border are part of the customs value.[6] On the example shipment, the 5% duty is $200.00 on the U.S. basis and $231.00 on the EU/UK basis.
Look up the rate for your product's 10-digit code in the Harmonized Tariff Schedule.[7] Some goods also owe additional duties that depend on the country of origin; those are listed in the schedule too, and the calculator expects the total of all of them in one rate.
U.S. customs user fees for fiscal year 2027
Every formal entry pays a merchandise processing fee (MPF) of 0.3464% of the goods value, never less than $34.58 and never more than $670.86 from October 1, 2026.[2][3] Ocean shipments also pay a 0.125% harbor maintenance fee (HMF) with no cap.[4]
| Goods value | 0.3464% | MPF charged | Limit |
|---|---|---|---|
| $1,000 | $3.46 | $34.58 | minimum |
| $5,000 | $17.32 | $34.58 | minimum |
| $9,983 | $34.58 | $34.58 | 0.3464% |
| $50,000 | $173.20 | $173.20 | 0.3464% |
| $193,667 | $670.86 | $670.86 | maximum |
| $300,000 | $1,039.20 | $670.86 | maximum |
The minimum binds below about $9,983 of goods and the maximum above about $193,670, so on a small formal entry the MPF is a much larger share of the value than 0.3464%. Low-value shipments, generally $2,500 or less, can clear on an informal entry, where the automated MPF is a flat $2.77 (manual informal entries pay $8.30 or $12.45).[2]
Worked example
A buyer orders 500 units at $8.00 ($4,000), pays $600 sea freight and $20 insurance, owes 5% duty, and pays a broker $150 and a trucker $120.
| Item | Amount |
|---|---|
| Goods | $4,000.00 |
| Freight and insurance | $620.00 |
| Duty, 5% of $4,000 | $200.00 |
| MPF (0.3464% = $13.86, raised to the minimum) | $34.58 |
| HMF, 0.125% | $5.00 |
| Broker and delivery | $270.00 |
| Total landed cost | $5,129.58 |
| Per unit | $10.26 |
The $8.00 item really costs $10.26. Pricing it for a 40% margin on the invoice price gives $13.33, which is only a 23.1% margin on landed cost; the landed-cost price is $17.10. Run that price through the margin calculator to check it, or add platform fees with the selling price calculator.
Order size changes the landed cost per unit
Fixed charges such as the MPF minimum, the broker fee and local delivery are spread over fewer units on a small order, so small orders land at a higher cost per unit even when freight scales with volume.
| Units | Goods | MPF | Landed per unit | Added to price |
|---|---|---|---|---|
| 100 | $800 | $34.58 | $12.70 | 58.7% |
| 250 | $2,000 | $34.58 | $10.87 | 35.9% |
| 500 | $4,000 | $34.58 | $10.26 | 28.2% |
| 1000 | $8,000 | $34.58 | $9.95 | 24.4% |
| 2500 | $20,000 | $69.28 | $9.79 | 22.3% |
Common landed cost mistakes
- Marking up the invoice price. A markup on the supplier price ignores freight and duty; see why on the markup calculator and apply the markup to landed cost instead.
- Charging duty on freight in the U.S. U.S. customs value excludes international freight and insurance; adding them overstates duty.
- Forgetting the MPF minimum. On a $3,000 formal entry the fee is $34.58, over 1.1% of the value, not 0.3464%.
- Leaving out the last mile. Port-to-warehouse trucking and Amazon inbound shipping are part of landed cost; for FBA, carry the landed cost into the FBA calculator as your item cost.
- Using one shipment for every price. Freight rates move; recalculate when a new quote comes in.
Estimates, not a customs rulingThis calculator does the arithmetic on the rates you enter. Your customs broker's entry summary and CBP's bill are the final word on what you owe.
Frequently asked questions
What is the landed cost formula?
Landed cost = goods + freight + insurance + duty + customs fees + broker + delivery. Divide by the number of units for landed cost per unit. 500 units at $8.00 in the example land at $10.26 each.
How do you calculate landed cost per unit?
Add up every cost of the shipment, from the supplier invoice to delivery at your warehouse, and divide by the number of units in it. Use the units you can sell: if some arrive damaged, divide by the good units only.
Is duty charged on shipping costs?
Not in the U.S.: customs value there excludes international freight and insurance. In the EU and the UK, transport and insurance up to the border are added to the customs value, so duty is charged on them too.
How much is the merchandise processing fee in 2026?
From October 1, 2026 (fiscal year 2027), the MPF on a formal entry is 0.3464% of the goods value, with a $34.58 minimum and a $670.86 maximum. An automated informal entry pays a flat $2.77.
Should I price from landed cost?
Yes. Landed cost is your real cost of goods, so margin and markup only mean what you think they mean when they are calculated on it.
Sources
- 19 CFR 152.102, Definitions: price actually paid or payable (excludes international freight and insurance)
- Customs User Fees To Be Adjusted for Inflation in Fiscal Year 2027 (91 FR 48398)
- 19 CFR 24.23, Fees for processing merchandise (0.3464% ad valorem fee)
- 19 CFR 24.24, Harbor maintenance fee (0.125% of value)
- Regulation (EU) No 952/2013, Union Customs Code, Article 71 (transport and insurance to the place of entry added to customs value)
- Delivery costs to include in the customs value
- Harmonized Tariff Schedule of the United States
- Publication 334, Tax Guide for Small Business (chapters 6 and 7: cost of goods sold and gross profit)