A supplier quote tells you what a part costs at the supplier’s dock. It does not tell you what the part costs once it reaches your receiving area. That number, the landed cost, is the one that should drive sourcing decisions, pricing and margin. With tariffs changing often since 2025, it is also the number that most often surprises small manufacturers.
This guide gives you a simple formula, a checklist of cost components, and a fully worked example. Every number in the example is hypothetical and chosen only to make the math easy to follow. Your real rates depend on your product’s classification, origin and shipping terms.
This post is general education, not legal, customs, tax, financial or compliance advice. Confirm details with a licensed professional and the official sources linked below.
The landed cost formula
Landed cost per unit = (Product cost + Freight + Insurance + Duties and tariffs + Customs fees + Brokerage and bond + Inland transport and handling + Inventory carrying cost) ÷ Units received
The formula is easy. The hard part is making sure nothing is missing and that each item uses the right base.
Landed cost components checklist
| Component | What it includes | Where the number comes from |
|---|---|---|
| Product cost | Unit price × quantity, tooling, packaging charges | Supplier quote and purchase order |
| International freight | Ocean or air freight, fuel surcharges, origin charges | Forwarder quote |
| Insurance | Cargo insurance premium | Forwarder or insurer |
| Duty | General (normal trade relations) rate for the HTS code | Harmonized Tariff Schedule |
| Additional tariffs | Any extra duties in effect on the product and origin | CBP guidance and your broker |
| CBP fees | Merchandise Processing Fee and, for ocean cargo, Harbor Maintenance Fee | CBP and the Federal Register |
| Brokerage and bond | Customs broker fee and customs bond | Broker invoice |
| Inland transport | Drayage, trucking to your plant, terminal fees | Carrier quote |
| Handling | Receiving, inspection, put-away | Your own cost data |
| Carrying cost | Cost of cash tied up in inventory during transit and safety stock | Your finance team |
The duty rate depends on the product’s Harmonized Tariff Schedule (HTS) classification and its country of origin. You can search the schedule at the USITC Harmonized Tariff Schedule. Classification and origin are legal determinations, so have a licensed customs broker confirm them before you rely on a rate.
Step by step: calculate landed cost for one shipment
- Write down the Incoterms rule on the quote, such as FOB or DDP. It tells you which costs the supplier already paid. The ICC Incoterms rules define each term.
- Calculate the product cost for the full order, including one-time tooling spread over the units it covers.
- Add international freight and insurance from your forwarder’s quote.
- Find the dutiable value. In the U.S., it is generally the transaction value of the goods, and separately identified international freight and insurance are generally excluded. CBP explains this in its Customs Value informed compliance publication.
- Apply the duty rate and any additional tariffs to the dutiable value.
- Add the CBP fees. For entries on or after October 1, 2026 (fiscal year 2027), the MPF on a formal entry is 0.3464% of value, with a minimum of $34.58 and a maximum of $670.86, according to CBP Dec. 26-14 in the Federal Register. For ocean cargo, add the HMF of 0.125% of the cargo value.
- Add the broker fee, bond, inland transport and handling.
- Add the carrying cost for the weeks the cash is tied up.
- Divide by the number of good units received.
Worked example: hypothetical imported bracket vs. domestic quote
A small Massachusetts manufacturer is comparing two quotes for 2,000 aluminum brackets. All figures below are hypothetical.
- Import quote: $12.00 per unit, FOB at the origin port, with 10 weeks from order to receipt.
- Domestic quote: $16.50 per unit, delivered for $400 in freight, with 2 weeks from order to receipt.
- Hypothetical duty: a 5% general rate plus a 25% additional tariff, for 30% in total.
- Carrying cost: 20% per year, a hypothetical rate for the cost of capital, storage and risk.
| Line item (hypothetical) | Import | Domestic |
|---|---|---|
| Product cost (2,000 units) | $24,000.00 | $33,000.00 |
| Ocean freight | $2,400.00 | — |
| Cargo insurance | $120.00 | — |
| Duty and additional tariff (30% of $24,000) | $7,200.00 | — |
| MPF (0.3464% of $24,000) | $83.14 | — |
| HMF (0.125% of $24,000) | $30.00 | — |
| Broker fee and single-entry bond | $235.00 | — |
| Drayage and trucking to plant | $850.00 | $400.00 |
| Receiving and inspection | $150.00 | $150.00 |
| Subtotal | $35,068.14 | $33,550.00 |
| Carrying cost (20% per year × weeks ÷ 52) | $1,348.77 | $258.08 |
| Total landed cost | $36,416.91 | $33,808.08 |
| Landed cost per unit | $18.21 | $16.90 |
The import quote looked 27% cheaper at the dock ($12.00 vs. $16.50). Once every cost is in, it is about 8% more expensive per unit in this hypothetical case. Change the tariff to 0% and the import wins again at roughly $14.47 per unit. That swing is why one tariff decision can flip a sourcing choice.
The MPF here is $83.14 because 0.3464% of $24,000 sits between the minimum and maximum. On a much smaller entry, the $34.58 minimum would apply. On a very large one, the $670.86 cap would.
Costs people forget in a landed cost model
- Quality costs. Rework, scrap and extra inspection on a new supplier’s first lots.
- Safety stock. A longer, more variable lead time needs more safety stock, and that stock carries cost too. See the safety stock and reorder point guide.
- Expedites. One air shipment to cover a late ocean shipment can erase a year of unit-price savings.
- Currency. If the quote is in a foreign currency, a 5% exchange-rate move changes your cost by about 5%.
- Minimum order quantities. Buying more than you need ties up cash and floor space.
- Tariff changes in transit. The rate that applies is generally the one in effect on the date of entry, not the date you ordered, so a change can land mid-shipment. Your broker can confirm the timing rules for your goods.
A simple landed cost template
Build one row per part number and keep it in a shared spreadsheet or a small database:
| Field | Example (hypothetical) |
|---|---|
| Part number and HTS code | BRK-100, confirmed by broker |
| Country of origin | As confirmed by broker |
| Unit price, currency, Incoterms rule | 12.00 USD, FOB |
| Freight and insurance per unit | $1.26 |
| Duty and additional tariff rates | 5% + 25% |
| Fees and brokerage per unit | $0.17 |
| Inland and handling per unit | $0.50 |
| Lead time in weeks | 10 |
| Carrying cost per unit | $0.67 |
| Landed cost per unit | $18.21 |
| Last updated | Date and who checked it |
In my own supply chain software work, the most useful addition is the “last updated” field. A landed cost that nobody has checked since the last tariff change is a guess.
How landed cost fits your sourcing strategy
Landed cost is one input, not the whole decision. Combine it with supplier risk, capacity and lead-time reliability. My tariff exposure and supplier risk checklist covers how to size tariff exposure across your supplier base. For the broader policy background, read Trade Wars and Tariffs Explained and Restoring U.S. Manufacturing. If you want help building a landed cost model or comparing domestic and overseas suppliers, see my manufacturing procurement and supply chain services.
Frequently asked questions
What is landed cost?
Landed cost is the total cost of getting one unit of a purchased item to your door and ready to use: the supplier price plus freight, insurance, duties, tariffs, customs fees, brokerage, inland transport, handling and the cost of carrying the inventory while it is in transit.
Is the duty calculated on the price including freight?
In the United States, duty is generally assessed on the transaction value of the goods, and international freight and insurance are generally excluded when they are identified separately. Your licensed customs broker should confirm the dutiable value for each entry.
What are MPF and HMF?
The Merchandise Processing Fee (MPF) is a CBP fee on formal entries: 0.3464% of value, with a minimum and maximum that CBP adjusts each fiscal year. The Harbor Maintenance Fee (HMF) is 0.125% of the cargo value and applies to cargo arriving through covered U.S. ports.
How often should I recalculate landed cost?
Recalculate whenever a tariff, freight rate or supplier price changes, and at least monthly for your top imported parts. Tariff actions have changed several times since 2025, so a quarterly update can be out of date.
Additional sources
- U.S. International Trade Commission: Harmonized Tariff Schedule search
- Federal Register: Customs user fees adjusted for fiscal year 2027 (CBP Dec. 26-14)
- eCFR: 19 CFR 24.24, Harbor Maintenance Fee
- CBP: Customs Value, What Every Member of the Trade Community Should Know
- International Chamber of Commerce: Incoterms rules
Peter Klausz is an MBA (University of Rochester, Simon Business School) and the founder of Statadventure, LLC, which has built supply chain software in Python and SQL since 2018. He previously managed F100 engine supply chain work at Pratt & Whitney. Based in Burlington, Massachusetts, he is open to contracting and new roles. Book a free 30-minute call.