Understanding your landed price
Landed price is the number to price from, and it is never the factory's quote: this guide's worked example turns £4.00 quoted into £5.16 a sellable unit once freight, duty, unreclaimable VAT, UK handling, tooling and the units that arrive unsellable are counted. Cambridge China Bridge charges no sourcing fee on goods orders and quotes one UK landed price.
The only number that matters
Landed price is what one sellable unit costs you by the time it is sitting in your warehouse, ready to sell. It is the number you should price from, plan from and compare suppliers on, and it is not the number on the factory's quotation. For a domestic buying benchmark, see UK wholesale prices versus China landed costs.
The gap between the two is where most first-time importing goes financially wrong. A quote of four pounds a unit can land at six or seven once everything is counted, and a business that priced its retail off four is now discounting to move stock it cannot afford to hold.
What goes into it
Start with the goods: unit price multiplied by quantity, in the currency you are actually paying. For revised supplier prices, see our guide to checking increases for double counting.
Add getting them here: freight and insurance to the UK, terminal handling at both ends, documentation, the customs entry, port charges, haulage to your address, and unloading. For allocation, see splitting freight costs across products.
Add the tax that stays: duty at the rate for your commodity code, plus anti-dumping duty if your goods carry it. Import VAT is normally recoverable if you are VAT registered and the goods are for your business, so it belongs in your cash-flow plan rather than in your unit cost.
Add what you paid before the goods existed: samples and their courier costs, and tooling, spread across the units you realistically expect to produce rather than across an optimistic lifetime.
Then subtract nothing and divide by less than you ordered. Some proportion of any run will not be sellable, so the divisor is the units you can actually sell, not the units you bought. This single adjustment is the one most spreadsheets miss.
A worked shape
Take an order of two thousand units quoted at four pounds. Goods are eight thousand pounds. Say freight, handling, entry and delivery come to eleven hundred, duty at your code adds a few hundred, and tooling of two thousand is spread over an expected run of ten thousand units, so four hundred falls on this order. Samples and courier were two hundred.
That is roughly ten thousand pounds of committed cost. Divide by two thousand and you get five pounds. But if you expect three per cent to be unsellable, you are dividing by nineteen hundred and forty, and the real figure is nearer five pounds sixteen.
The point is not the arithmetic. It is that a four pound quote is a five pound sixteen product, and every pricing, margin and break-even decision you make should start from the second number.
| Line | Amount | How it is worked out |
|---|---|---|
| Goods | £8,000.00 | 2,000 units at £4.00 |
| Freight and insurance to the UK border | £800.00 | The part that enters the customs value |
| UK handling, entry and delivery | £300.00 | After the border, so outside the customs value |
| Customs value | £8,800.00 | Goods plus freight and insurance to the border |
| Duty at 3.5% | £308.00 | 3.5% of £8,800, not of the £8,000 invoice |
| Tooling | £400.00 | £2,000 spread over 10,000 expected units |
| Samples and courier | £200.00 | Spent before the goods existed |
| Committed cost | £10,008.00 | The total this order has cost you |
| Per unit ordered | £5.00 | £10,008 ÷ 2,000 |
| Per unit you can sell | £5.16 | £10,008 ÷ 1,940, allowing 3% unsellable |
Two places the arithmetic quietly goes wrong
The first is the customs value. Duty is not charged on your invoice; it is charged on the customs value, which includes freight and insurance to the UK border and things you supplied to the factory such as tooling, even when those were invoiced separately and never shipped. If you calculated duty on the invoice alone, your figure is low.
The second is currency. For the customs declaration, conversion does not normally use your bank's rate on the day. Unless a fixed contractual exchange rate applies, use the applicable HMRC exchange rate when the declaration to free circulation is accepted, so the duty you actually pay can differ from the duty you modelled. Meanwhile your own exposure runs from the day you commit to the day you pay, which is a separate risk worth being deliberate about.
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Using it to make decisions
Once you have a landed price, three questions get easier. What must I sell this at to make the margin the business needs, allowing for returns and the cost of holding stock? How many units must I sell before this order has paid for itself? And is the supplier who quoted higher actually more expensive once packing efficiency, defect rate and lead time are in the same column? For presenting your retail price, see what advertised consumer prices must include. For channel buying limits, see target landed costs for wholesale and retail. For gift sets, see our guide to pricing with mixed VAT rates.
That last question is the one that changes minds. A supplier who is five per cent dearer per unit but packs thirty per cent more into a carton and sends fewer defects is often cheaper landed, and you would never see it from a price list.
Build the landed price before you commit, not after the invoice arrives. Our duty calculator and container calculator will do the two fiddliest parts for you, and the customs value builder will construct the value the declaration should actually use. For quote formats, see delivered prices and itemised sourcing quotes.
For goods that are heavy for their value, freight can be a large share of the landed price; our vinyl flooring guide works through a container where it is about a sixth of the customs value.
Related guides: Is branded merchandise cheaper direct from China?.
For practical ways to bring these costs down, see Practical ways to reduce your import costs.
Frequently asked questions
What is landed price?
The total cost of one sellable unit delivered to your warehouse: goods, freight and insurance, port and clearance charges, duty and any anti-dumping duty, delivery, plus samples and tooling spread across the run, divided by the units you can actually sell rather than the units you bought.
Should import VAT be in my landed cost?
Normally no, if you are VAT registered and the goods are for your business, because it is usually recoverable. Keep it in your cash-flow plan instead. Duty is different and belongs in the unit cost, because it is not recoverable.
Why is the duty higher than I calculated?
Usually because duty is charged on the customs value rather than the invoice. That value includes freight and insurance to the UK border and buyer-supplied items such as tooling. Currency is the other common reason: unless a fixed contractual exchange rate applies, the declaration uses the applicable HMRC exchange rate when the declaration to free circulation is accepted, not your bank's rate on the day.
What defect allowance should I use?
It depends on the product and the supplier, and the honest answer for a first order is that you do not know yet. Use a figure you would be comfortable being wrong about, record what actually happens, and use your own number from the second order onwards.
Can a more expensive supplier be cheaper?
Frequently. Packing density changes freight, defect rate changes how many units you can sell, and lead time changes how much stock you have to hold. A higher unit price with better numbers in those three columns often lands lower.