Landed cost: the FOB to LDP formula every importer should have memorized

Every importer, at some point, quotes a customer a price based on FOB, wins the deal, then does the paperwork and realizes they just booked a loss. It happens to first-year buyers and it happens to twenty-year veterans on a category they haven't touched before. The mechanism is always the same: they treated the factory's invoice as if it were the actual cost of the goods.

It isn't. It's about 60–75% of the actual cost, depending on category and origin. This post covers exactly what the other 25–40% consists of, the formula for calculating it, a real example walked through end to end, and the specific ways this math bites buyers who forget one of the variables.

Why FOB is a lie you tell yourself

FOB (Free On Board) is the price the goods cost, packed, at the port of origin. When a Guangzhou factory quotes you $3.20 FOB Shenzhen, they mean: if you show up at Yantian port with a truck, we hand you the goods for $3.20 a unit. Nothing more.

What FOB does not include, and what your accounts payable department will absolutely spend money on:

• Ocean freight from Shenzhen to your destination port (Long Beach, Rotterdam, Felixstowe, wherever)
• Customs duties (the tariff, based on the HTS code and country of origin)
• Merchandise Processing Fee and Harbor Maintenance Fee (US specific, but every country has equivalents)
• Customs brokerage
• Inland freight from the destination port to your warehouse
• Insurance, if you carry it separately
• The freight forwarder's origin fees (documentation, terminal handling at Yantian, telex release)

Add all of that up and divide by the number of units in the container and you get the LDP (Landed Duty Paid) cost. That's the number you need before you quote anything to a retail buyer, before you build a wholesale price list, before you decide whether the product is worth ordering in the first place.

The single most common cost mistake in importing isn't over-estimating landed cost. It's forgetting one of the six or seven things that go into it, then re-discovering it two months later when the shipment clears customs.

The full formula

Here is the formula, exactly as it should live in your head:

Let's take it apart.

FOB

The per-unit price the factory quoted you. If it was quoted EXW (Ex Works, from the factory door), add a small trucking cost to get to FOB. If it was quoted CIF (Cost Insurance Freight, delivered to your destination port), subtract the freight and treat it separately in the container cost.

Package

The per-unit cost of any packaging or gift box that isn't already baked into FOB. Master cartons are almost always included. Retail-ready boxes with your logo, blister packs, hangtags, and inserts frequently are not. Ask. If it's $0.35 for a full-color retail box, that is $0.35 per unit, not per SKU.

Tariff

Expressed as a decimal. A 25% Section 301 tariff plus a 3.9% MFN duty is 0.289, not 28.9. This is a per-unit percentage applied to the CIF or duty-basis value, which for our purposes is roughly (FOB + Package). Different countries and different HTS codes calculate the base slightly differently, but for a working number this is close enough.

ContainerCost

Total freight + duty (aside from unit tariff) + brokerage + inland cost to your warehouse, as a lump sum. For a 40ft HQ from Yantian to Long Beach in a normal market this is around $4,500 all in. In peak season 2021 it was $18,000. In a soft market it's $2,800. Ask your forwarder.

ContainerQty

How many units of the product fit in that container. This is where a lot of buyers get in trouble: they estimate on the master carton dimensions the factory gives them and forget to leave 4–5% dead space for uneven stacking. If the factory says 18,000 pcs per 40HQ, budget for 17,000 until you have a real load plan.

A real example: 40ft HQ of Bluetooth speakers

Let's price a mid-range portable Bluetooth speaker out of Shenzhen. This is a category everyone reading this has probably sourced or considered sourcing.

Running the formula:

So the "$3.20 speaker" is really a $4.06 speaker. That's 27% more than the invoice number. If you're wholesaling at $5.50 and mentally pricing off the $3.20 FOB, you think you're running a 42% margin (1 − 3.20/5.50). Your real margin at $4.06 landed is 26% (1 − 4.06/5.50) — 16 points of margin you didn't know you were burning, and none of your operating overhead is in there yet.

Bump the container into a soft market (freight at $3,200) and LDP drops to $3.94. Bump it into a bad market (freight at $9,500) and LDP climbs to $4.38. This is why fixing your wholesale price 90 days before the container lands is dangerous.

How US tariffs actually work (in one section)

Three numbers matter:

1. The HTS code for your product (10-digit for the US, 6-digit for the international HS code). Bluetooth speakers are 8518.22.0000. Toys are 9503. Bags are 4202. If you don't have one yet, the factory usually knows it, and a customs broker will confirm.
2. The MFN (Most Favored Nation) duty rate for that HTS. This is the baseline. You look it up in the USITC tariff schedule. For most consumer electronics it's between 0% and 5%.
3. Any additional Section 301 tariff for goods of Chinese origin. This is the number that has moved the most in the last five years and is the one buyers most often forget. Depending on the HTS code and current administration, it can be 0%, 7.5%, 25%, or higher. Some codes are excluded entirely, and exclusions expire.

Add MFN + Section 301 + any anti-dumping duty (rare, but check for steel, plywood, mattresses, and a handful of other categories) and that's your tariff. Convert to a decimal for the formula.

The container-cost trap

Here's a mistake even careful buyers make. They calculate landed cost for a full container and quote a customer based on that number. Then the customer asks for a half-container test order, and the buyer quotes the same LDP. That's wrong.

Per-unit freight is fixed cost divided by quantity, and quantity is the only variable that moves. Watch what happens to our Bluetooth speaker as order quantity drops:

An air-freighted sample order for 200 units of a "$3.20 speaker" lands at $12.73. If the customer thinks they're getting a wholesale deal on a small MOQ, you are eating that difference. The container cost per unit is the single most volatile number in the formula. Never quote LDP without specifying the quantity it's calculated on.

Five mistakes I've watched buyers make

1. Quoting off FOB. Already covered. It costs more people more money than every other item on this list combined.
2. Forgetting Section 301. Every couple of years an HTS gets added to or removed from the Section 301 list. Buyers who calculated landed cost on a spreadsheet three years ago and haven't updated it are working with stale tariff numbers. Re-check every SKU every year.
3. Confusing gift-box cost with master-carton cost. The factory quote for FOB includes shipping cartons. It usually does not include the retail packaging your buyer wants. Add it, per unit, into the Package variable. A $0.40 box on a $3.20 FOB item moves LDP by 12%.
4. Using estimated container quantities. Factory-quoted "pieces per 40HQ" is almost always optimistic. Get a real load plan from the factory or your forwarder before you commit to price.
5. Ignoring freight volatility. A price that is a healthy margin in a $4,800 freight market is a losing deal in a $12,000 freight market. Freight can double in six weeks. If you're pricing a customer contract for a year, either build in a freight surcharge clause or lock in a rate agreement with your forwarder.

Doing this in the field, without a spreadsheet

The reason buyers make these mistakes is not that the math is hard. It's that the math never happens in the calm of an office. It happens at 4pm on the second day of Canton Fair, standing at a booth, staring at a factory rep who wants a decision now, with a phone in one hand and a business card in the other. The buyer estimates in their head, says a number, and moves on. And they're off by 20%.

This is exactly why the Show Sourcing app has the formula built in. You enter FOB and MOQ once, tag the country of origin and category, and the app applies the current tariff rules and your saved container costs automatically. LDP shows up next to FOB on every product card so the number you quote is the number you can defend. If you're headed to a show, it's worth the install. If you also want the deeper Canton Fair playbook, our Canton Fair prep checklist covers everything else you'll want in your pocket. And if the OCR side of your workflow is a mess, our writeup on business card OCR goes into what actually works when you have 300 cards and 4 hours.