How landed cost really works
The factory quotes $4 a unit. Then freight lands, the duty bill arrives, port charges appear — and that $4 unit has quietly become $7. Landed cost is everything it takes to get one unit from the supplier's dock to yours. Here's each component, in the order it hits your bank account.
1. FOB price — the start, not the end
FOB (free on board) is what you pay the supplier: goods plus delivery to the export port. It's the number on the PO, the number in most pricing spreadsheets — and, on most routes, only 60–80% of what the goods will actually cost you.
2. Duty — the biggest hidden line
Duty is charged on the customs value at the stacked rate in force for your origin and product: base HTS rate plus Section 301, Section 232, or country rounds as applicable. On a China route today the stack commonly lands at 30–45% of the customs value. This is the line FOB costing misses most badly — see Duty rates, explained.
3. MPF and HMF — the CBP fees
Two federal fees ride on almost every formal entry. The Merchandise Processing Fee (MPF) is 0.3464% of the entry value, with a minimum and a cap per entry. The Harbor Maintenance Fee (HMF) adds 0.125% on ocean shipments. Small percentages, but on a $100,000 entry they add roughly $475.
4. Brokerage — someone files the paperwork
Every formal entry needs filing, and brokers charge per entry — typically $100–$150 for a straightforward shipment, more with extra classifications or PGA requirements. Since de minimis ended in August 2025, even small parcels carry this line. Per unit, it's small on a full container and significant on a courier shipment.
5. Freight and insurance — the physical move
Ocean, air, or courier, plus cargo insurance if you carry it. Freight is volatile — the same lane can double between booking cycles — and it's often quoted separately from every other cost, which is exactly why it gets left out of per-unit math.
6. FX cost — the invisible 2–4%
If you pay the supplier by bank wire in their currency, the exchange rate you get is marked up — typically 2–4% hidden in the spread, occasionally far worse. One importer wired $38,000 through a major bank and paid $3,100 in FX cost, over 8%, invisible in the rate. It never appears on any invoice, which is why almost no costing includes it.
The worked example
4,000 units of bicycle parts from China, FOB $85,000:
- FOB value: $85,000 ($21.25/unit)
- Duty at a 35% effective stack: $29,750
- MPF (0.3464%, under the cap): $294
- HMF (ocean, 0.125%): $106
- Brokerage: $150
- Ocean freight + insurance: $6,500
- FX cost at 2.5% of the wire: $2,125
True landed cost: $123,925 — $30.98 per unit. Against the $21.25 FOB figure, that's a 46% gap. If the price list was built for a 35% margin over $21.25, the real margin is under 9% — before warehousing, before overhead.