Landed cost
Landed cost is the total a buyer pays to get goods into their own warehouse. It adds ocean or air freight, insurance, customs duty and taxes, brokerage fees, port handling and inland delivery to the supplier’s price. Buyers rank suppliers by landed cost because two quotes on different Incoterms only compare once every cost is added.
What goes into landed cost
The quoted price is only one piece. Landed cost adds every expense from the factory gate to the buyer’s receiving dock: freight, insurance, customs clearance, duties and taxes, port handling, and the final leg to the warehouse. A buyer holding quotes from suppliers in three countries cannot rank them until they calculate what each costs landed.
A typical landed cost has seven components: product cost, international freight (ocean or air), cargo insurance, import duty and taxes (such as VAT or GST), customs brokerage, port or terminal charges, and inland transport to the buyer’s warehouse. Some buyers also fold in financing or currency hedging.
The Incoterm on the quote determines which costs the buyer pays separately. Under FOB, the buyer arranges and pays for freight, insurance, import duty and delivery. Under CIF, the supplier pays freight and minimum insurance to the destination port, but the buyer still pays duty and onward transport. Under DDP, the supplier pays everything and delivers the goods cleared for import at the named place. Landed cost is the sum after all those pieces are accounted for, regardless of who paid each one.
Landed cost vs FOB price and ex-works price
Landed cost
The total cost to receive goods at the buyer’s door or warehouse. It includes product cost, freight, insurance, duties, taxes, brokerage, port handling and inland delivery. It is the number buyers use to compare suppliers across countries or Incoterms.
FOB price
The price the supplier charges to load the goods on board the vessel at the origin port and clear export customs. The buyer pays ocean freight, insurance, import duty, brokerage and inland delivery on top of the FOB price. FOB price plus those costs equals landed cost.
Ex-works (EXW) price
The price at which the supplier makes the goods available at the factory gate. The buyer pays for loading, export clearance, freight, insurance, import clearance and delivery. Ex-works price is usually the lowest quoted number, and the buyer’s landed cost includes every transport and customs expense from the factory onward.
Why buyers compare suppliers on landed cost
A lower FOB price can cost more landed if freight is expensive or duty rates are high. A buyer sourcing the same product from three countries needs the landed cost at their warehouse to decide which supplier wins. The quote price alone does not tell them which deal saves money.
Freight cost differences
Bulky goods such as upholstered furniture pay freight by volume, so shipping takes a large share of their landed cost. A supplier on an expensive or indirect shipping route may quote a lower FOB price and still land higher once freight is added.
Duty and tax rates
Import duty rates vary by product category and country of origin. A trade agreement can lower the duty from one origin. Two suppliers with the same FOB price land at different costs when one origin pays less duty.
Incoterm impact
A supplier quoting DDP folds freight, insurance and duty into the price, so the buyer sees one delivered number. Another supplier quoting FOB leaves the buyer to arrange and pay for those separately. Landed cost makes both quotes comparable by showing the total spend either way.
Real unit cost calculation
A retailer or brand sets its selling price from the landed unit cost. Inventory valuation and purchase budgets start from the same number, which is why a buyer converts every FOB or ex-works quote to landed cost first.
How Poly9 AI handles landed cost quoting
Recipes hold your cost in your currency and quote in the buyer’s. The exchange rate you set and your markup rule are applied on every line, and the quote shows the FOB port with lead time.
When a buyer asks for a CIF or DDP quote and the recipe has no freight or duty rule for that destination, Poly9 AI returns price on request. Your team quotes the landed cost or DDP price manually. The AI never guesses a freight rate or a duty.
Buyers who want to calculate landed cost themselves add their own freight, insurance, duty and handling estimates to the FOB price. Buyers who need one delivered number ask for DDP, and the seller either quotes it from rules or provides it on request.
Terms landed cost connects to
Incoterms
Trade terms (FOB, CIF, EXW, DDP) that define who pays freight, insurance, duty and delivery. The Incoterm on the quote determines which costs the supplier covers and which the buyer adds to reach landed cost.
FOB rules and quoting
How to quote FOB from your rules. FOB is the starting point for the buyer’s landed cost calculation.
Cost recipe
The pricing rules behind a custom product quote. Landed cost starts with the cost in the recipe.
Certified quote
A quote priced from your approved rules. A certified quote gives buyers confidence that the FOB price is reliable, so they can calculate landed cost and compare suppliers accurately.
Proforma invoice
The preliminary invoice a seller issues before shipping. It states the Incoterm with the price, so the buyer knows which costs to add to reach landed cost and the bank knows the transaction value.
MOQ (Minimum Order Quantity)
The smallest order a maker accepts. MOQ, Incoterm, FOB price and lead time are the facts buyers need to calculate landed cost per unit and total landed cost for the order.
Questions about landed cost
What is the landed cost formula?
How do you calculate landed cost from an FOB quote?
What is the difference between landed cost and FOB price?
Why does landed cost vary between suppliers in different countries?
Does a DDP quote include landed cost?
How does Poly9 AI help with landed cost?
Give buyers an FOB price they can land
Poly9 AI prices every configured variant from your cost recipes, shows the FOB port with lead time, and returns price on request when a rule is missing. Add your catalog or start from your industry sample.