Landed cost: the components that decide it

Landed cost is the total cost of a good once it has arrived at the buyer’s door, ready for use. It is the only basis on which international offers can be compared honestly, because two quotations on different Incoterms, from different origins, with different tariff treatment, are not comparable at the invoice line alone.

The components are the ex-works goods value; transport and insurance to the destination; customs duty at the applicable tariff and origin treatment; import VAT calculated on the duty-inclusive value; and any brokerage, handling, inspection, certification and installation the delivery requires. Each is a variable, and several are decided by structure rather than by negotiation — the tariff classification, the origin arrangement, and who is positioned to recover VAT.

The practical discipline is to build the landed-cost model before selecting a supplier, not after. A lower ex-works price sourced through a party that cannot access a duty-relief regime, or cannot recover import VAT, routinely lands higher than a nominally more expensive offer structured correctly.