If you import, the price on your supplier’s invoice is only the start. Freight, insurance, customs duty and clearing can add a large share on top. Skip the landed cost calculation and every margin you report is wrong.
What landed cost includes
- Supplier price (converted to your currency at the right rate)
- International freight and insurance
- Customs duty
- Clearing, port handling and inland transport to your warehouse
A worked landed cost calculation
You import two items in one container:
| Item | Qty | Supplier value | Share of value |
|---|---|---|---|
| Item A | 1,000 | AED 60,000 | 60% |
| Item B | 500 | AED 40,000 | 40% |
| Total | AED 100,000 | 100% |
Freight, duty and clearing total AED 15,000. Spread by value:
- Item A carries AED 9,000, so its unit cost rises from AED 60.00 to AED 69.00.
- Item B carries AED 6,000, so its unit cost rises from AED 80.00 to AED 92.00.
If you priced Item A at AED 75 believing it cost AED 60, you thought you made 20% margin. Your real margin is 8%.
How to spread the costs
Value is the most common basis. Quantity, weight or volume can suit bulky, low-value goods better. Pick the method that best reflects what drove the cost, and apply it consistently.
Track the shipment, not just the cost
For imports, knowing what is on the water matters as much as what it cost. Tracking the bill of lading, container, ETA and customs status tells your sales team when stock will really arrive.
How Square Loop helps
In Square Loop, international purchase orders flow through shipment tracking (B/L or AWB, container, vessel, ports, ETA and customs status) before the goods receipt. Freight, duty, insurance and handling are added as landed costs and spread onto item cost, so weighted average cost and gross margin reports reflect reality in inventory. Foreign-currency purchases post exchange differences automatically, and the Landed Cost Register shows every charge.
Frequently asked questions
What is the formula for landed cost?
Landed cost = supplier price + freight + insurance + customs duty + clearing and handling, divided across the items received.
Should landed cost be added to inventory value?
Yes. Costs needed to bring goods to their current location form part of their inventory cost under common accounting standards.
Know what every item really costs. See landed cost in a free Square Loop demo.
Book a Free Demo
