What is Landed cost?

Landed cost is what a product really costs once it arrives and is ready to sell. It starts with the supplier’s price and adds every cost of getting the goods to your location: international and domestic freight, customs duties, brokerage fees, insurance, currency conversion and handling. For imported goods, these extras can add 10% to 30% or more to the invoice price, which is why ignoring them overstates margins.

In the books, landed costs should be added to the cost of inventory, not expensed separately as freight or duty. That way they flow into cost of goods sold as the products sell, matching cost with revenue. The practical challenge is allocation: a $2,000 freight bill covering 40 different products has to be split, usually by value, weight, volume or quantity. The method should reflect what actually drives the cost.

Recoverable taxes are not part of landed cost. In Canada, the GST or HST paid on imports at the border is generally claimable as an input tax credit by a registrant, so it does not belong in inventory value. Duties, brokerage fees and non-recoverable taxes do. Getting landed cost right is especially important for wholesalers, importers and Amazon sellers whose margins depend on accurate per-unit cost.