Landed cost calculator for UK importers

What landed cost means

Landed cost is the full cost of a product once it has arrived at your premises. It is the number that belongs in your margin calculation and in any comparison between suppliers. Two quotes with the same unit price can have very different landed costs once freight, duty and handling are added, and a higher unit price from a nearer supplier can turn out cheaper.

The calculator works through the elements in the order they arise: the price of the goods, getting them to the UK border, duty, and the costs after the border. Import VAT is shown separately because, for most VAT-registered businesses, it is recoverable.

The supplier price and exchange rate

Start with the unit price in the currency the supplier quotes, multiplied by the order quantity. Convert to sterling at the rate you expect to pay when the invoice is due, not today's headline rate. Your bank or payment provider's rate, including its margin, is the one that matters. On long lead times, currency movement can change the landed cost as much as a price negotiation.

Check what the supplier's price includes. A price quoted ex works leaves you to pay for collection and export clearance; a price quoted free on board includes delivery to the port of export. The Incoterms guide explains who pays for what under each term.

Freight and insurance to the UK border

Freight covers moving the goods from the supplier to the UK: sea, rail, road or air, plus origin charges such as collection and export handling. Insurance covers loss or damage in transit. In the calculator, enter freight and insurance up to the point where the goods enter the UK, because that is the part included in the customs value.

For customs purposes, delivery costs include transport, insurance, loading and handling, container charges and terminal charges, up to the place where the goods are introduced into the UK^[4]. Inland transport and associated costs in the country of export must also be included^[4]. For sea freight delivered direct to the UK, the place of introduction is the UK port of importation^[4].

Import duty

Duty is a percentage of the customs value: the goods value plus freight and insurance to the UK border. The rate depends on the commodity code of the goods and, in some cases, their origin^[3]. Some goods are duty free; others carry additional duties or need licences. Getting the commodity code right is the single most important step in estimating duty.

For a worked example on goods from China, including how rates are found and how preferential rates can apply, see import duty from China to the UK.

Other charges after the border

After the goods arrive, there are usually more costs before they reach your shelf:

• port, terminal and handling charges in the UK
• customs clearance and broker fees
• delivery from the port to your warehouse
• storage if the goods wait at the port
• inspection or testing on arrival

These do not attract duty in the calculator, but they belong in landed cost. Ask your freight forwarder for an all-in quote that lists them, so nothing appears later as a surprise.

Import VAT as a cash-flow item

Imported goods are normally charged VAT at the same rate as if they had been supplied in the UK^[2]. The standard rate is 20%^[1], though some goods carry a reduced rate. The value for VAT is the customs value plus incidental expenses such as transport and insurance to the goods' first destination in the UK, and any duty payable^[2].

VAT-registered businesses can use postponed VAT accounting to declare import VAT and reclaim it as input tax on the same VAT Return^[2]. That is why the calculator shows import VAT separately: it matters for cash flow, especially if you pay it at the border instead, but it is not part of the cost of the goods for most businesses.

A worked approach to comparing two suppliers

The calculator is most useful when you run it more than once. To compare two suppliers, for example one overseas and one near-shore, enter each quote with its own freight, insurance, duty rate and post-border charges, and note the landed cost per unit for each.

• Use the same order quantity for both, or the quantity each supplier will actually accept.
• Use freight quotes for the route and mode you would really use, not a rate card.
• Check the commodity code and duty rate for each origin, as preferences can differ.
• Run a second scenario with a less favourable exchange rate to see how sensitive the result is.

If the gap between the two landed costs is small, the less visible costs below will usually decide the choice. If the gap is large, it is worth checking that the cheaper option really meets your specification and lead time before you commit.

Costs the calculator leaves out

A full landed cost comparison also considers costs that do not appear on an invoice: the stock you hold because of long lead times, the cash tied up in goods at sea, minimum order quantities, the cost of quality failures and the time spent managing a distant supplier. These are harder to put a number on, but they often decide whether a lower overseas price is really cheaper than a UK or near-shore option.

Frequently asked questions

If you want help to compare suppliers on landed cost across the UK and overseas, see our product sourcing service.