Work Out Landed Cost and Real Margin Before You Place an Order

A supplier quotes $8.00, the same product sells at $25, and the order looks easy. Then freight, duty, fees, defects and returns take their share, sometimes after the money has left your account. Work through this first and you will have a landed cost per sellable unit, a net margin you can trust, and a price below which you should not sell.

Every cost between the supplier's quote and the shelf

Landed cost is what one unit costs once it is in your stock and ready to sell. Selling costs come after that, but a real margin needs both.

• Freight. Origin charges, the main journey, destination port charges and delivery to your door.
• Cargo insurance. Find out who buys it and what it covers.
• Customs duty. Set by the product code, its origin and the destination.
• Brokerage and customs fees. The broker's filing charge, plus any fees from the authority.
• Payment and FX fees. Transfer charges, card surcharges, and the exchange rate you actually get.
• Inspection. A fixed cost per visit, so it weighs far more on a small order.
• Defects and shortages. Their cost falls on the units you can sell.
• Customer returns. Return postage, repacking, and items you can only resell at a discount.
• Marketplace and payment fees. Take these from your platform's current fee page.
• Fulfilment and advertising. Picking, packing, postage and the ad spend needed to win a sale.

Import VAT and sales tax: real cost or only cash flow?

• UK. Import VAT is charged on the customs value plus duty and any transport and insurance to the first UK destination. A VAT-registered business can normally use postponed VAT accounting to declare and reclaim it on the same return. A business that is not registered must pay it and cannot reclaim it, so for that business it belongs in landed cost.
• EU. Rates vary by member state, and VAT is calculated on the value of the goods plus duty and any excise. VAT-registered firms can reclaim it as input tax.
• US. There is no national VAT or sales tax. Sales and use taxes are set at state and local level, and purchases for resale are usually handled with a resale certificate. The rules differ by state, so check each one where you buy or sell.

In every market, work out margin on your selling price before tax, and ask an accountant how these rules apply to your registration.

How Incoterms change what is already in your quote

Two quotes for one product can differ simply because they stop at different points, and an Incoterm tells you where that point is. A quote should name the rule, the place and the version, for example "FOB Ningbo, Incoterms 2020".

CIF moves the bill, not the risk. The seller pays freight to your port, but risk passes at origin and the seller only has to buy minimum insurance cover. Check who pays destination charges too.

EXW looks cheapest and leaves you the most work. You handle export clearance in a country where you may have no presence, and the ICC's Incoterms 2020 checklist calls EXW suitable primarily for domestic trade. Ask for FCA instead, where the seller clears the goods for export.

DDP is simple only on paper. The ICC warns of complications, and some countries bar foreign companies from carrying out import formalities. Ask who the importer of record will be, and ask for freight and duty as separate lines, because a single price can hide a markup on both.

The ICC also points containerised goods towards FCA or CIP rather than FOB or CIF. Whatever the rule, put loading and terminal charges in writing.

A quote request you can copy

Hello [name], we are comparing suppliers for [product] and plan to order [quantity] units for delivery to [city, country]. Please quote your unit price and state: (1) the Incoterms 2020 rule and named place; (2) any charges not included; (3) the HS code you use and the country of origin; (4) carton size, gross weight and units per carton; (5) payment terms and methods; (6) how defects and shortages are settled; (7) lead time from deposit to shipment. If you can also quote delivered to our address, please show freight and duty as separate lines. Thank you, [name, company].

How duty is worked out and how to find a tariff code

The basic sum is customs value × duty rate. The code, the origin and the value decide the answer.

Find the code and check the origin

Note what the product is made of and what it does, then search the official tariff for your destination: the USITC's Harmonized Tariff Schedule in the US, TARIC in the EU, or the UK Trade Tariff. The first six digits are international and each market adds its own, so the code on a supplier's invoice is a lead, not an answer.

CBP makes the final decision on the US rate, not the importer. If a wrong code would change your decision, ask for a binding answer before you order: a binding ruling from CBP, Binding Tariff Information in the EU, or an Advance Tariff Ruling for Great Britain.

Then check origin. Where the goods were made can change the rate, trigger extra duties such as anti-dumping, or qualify them for a preferential rate under a trade agreement.

Know which value the rate applies to

• EU and UK. The customs value includes transport and insurance up to the point where the goods enter the territory.
• US. Transaction value excludes international freight and insurance, but CBP allows only actual, verifiable costs to be deducted from a price that includes them. Keep the freight invoice.

The US also charges a merchandise processing fee on formal entries (0.3464%, minimum $34.58, maximum $670.86) and a 0.125% harbor maintenance fee. Those figures are from CBP's user fee table, last modified 9 October 2026.

Since 24 July 2026, the US has also charged Section 301 duties of 10% or 12.5% on goods from 60 economies, with some products exempted. For goods from some partners, such as the EU, the rate is set net of the normal duty. Other duties may apply too, so read the entry for your code on the day you order and have your broker confirm it.

Low-value import rules, as checked on 4 November 2026

These matter for samples, trial orders and suppliers who ship direct to your customers.

• US. The $800 de minimis exemption is suspended indefinitely for all countries, under CBP rules published on 24 June 2026. A cheap sample now needs an entry and pays applicable duties and fees. Informal entry remains available up to $2,500. Bona fide gifts are unaffected, and mail has its own filing process.
• EU. The €150 duty relief ended on 30 June 2026. A temporary €3 per item duty and a €2 per item handling fee apply to distance sales, which in practice means sales to consumers. The duty covers consignments up to €150 and runs until 1 July 2028, when normal rates take over. The fee applies from 1 November 2026 at any value. An "item" follows tariff classification, so five identical T-shirts count once. A VAT-registered business importing stock should expect the normal tariff rate, and confirm it with a broker.
• UK. The government has confirmed that the £135 customs duty relief will go by October 2028 at the latest (response updated 13 July 2026). Sellers and online marketplaces will then pay the duty quarterly. Check the start date before you plan around it. VAT on consignments of £135 or less is generally charged by the seller at the point of sale, or by the business customer under the reverse charge if it gives a valid UK VAT number.

From unit quote to net margin: a worked example

Margin and markup are different numbers

Markup is profit divided by cost. Margin is profit divided by selling price. A product that costs $10 and sells for $15 has a 50% markup and a 33.3% margin. The usual mistake is to want a 50% margin and add 50% to cost. For a 50% margin, the price is cost ÷ (1 − 0.50), which is $20, not $15.

The example

This is an illustrative example with round numbers, not a real shipment. You order 1,000 units at $8.00 FOB, pay duty at an assumed 6% on the FOB value, expect 4% of units to be unsellable, and sell at $25.00 before tax.

On the quote alone, this looked like a 68% margin ($17 ÷ $25). You actually keep 13%. If all 960 units sell, that is $3,120 of profit on $10,800 of cash, before overheads.

Duty assumptions matter. On a value including freight and insurance, the same 6% would be charged on $9,360, adding $81.60. An extra 12.5% on the goods would add $1,000, cutting profit to $2.21 a unit and the margin to 8.8%.

To repeat this in our wholesale margin calculator, enter 8 as the unit price, 1000 as the quantity, 1300 as freight, 6 as duty, 1470 as other costs, 25 as the selling price, 15 as fees and 6.75 as fulfilment. The $1,470 includes a $450 allowance for the 40 lost units, so the unit figures match, but the order totals it shows assume 1,000 sellable units.

Why the cheaper unit price can lose

Now take a second illustrative supplier: a distributor in your own country quoting $10.00 delivered, duty paid.

Supplier B wins by $0.95 a unit, before counting speed: stock that arrives sooner brings your cash back sooner.

Local does not always win. A's fixed costs shrink over a larger order, so compare at your real volume. For local stock, try suppliers with a US warehouse or low-MOQ suppliers. Our quote tracker compares quotes on landed cost and margin if you would rather not keep a spreadsheet.

Setting a price floor, and what to do when the numbers do not work

Price = (landed cost + fixed selling costs per unit) ÷ (1 − percentage fees − target margin)

In the example, landed cost plus fixed selling costs comes to $18.00 and fees are 15%.

• Break-even price: $18.00 ÷ 0.85 = $21.18. Below this, you lose money on every sale.
• Target price for a 20% net margin: $18.00 ÷ 0.65 = $27.69.

Your floor sits at or above break-even and limits your promotions. A 20% discount on $25 gives $20, and after $3 in fees and $18 in costs you lose $1.00 a unit.

If the numbers fall short, see which change moves them most:

• Raise the price by $2. Profit becomes $4.95 a unit and the margin 18.3%, if demand holds. Test this first.
• Cut fulfilment by $1. Profit becomes $4.25 and the margin 17.0%. Look at packaging size and carrier rates.
• Cut the unit price by $0.50. Duty and payment fees fall with it, so you save $0.56 per sellable unit, and the margin rises to about 15%.

After that, consolidate shipments, shrink the carton, check for a preferential origin, or buy through a distributor. Our guide on negotiating a minimum order covers how to ask. If the numbers still fail, walk away.

The mistakes people actually make

• Comparing different Incoterms. $8.00 FOB and $10.00 delivered are not quotes for the same thing.
• Dividing by units ordered. Divide by units you can sell.
• Trusting the supplier's tariff code. It may be for another market, and as importer you may have to answer for it.
• Reusing last year's duty. Rates and low-value rules have changed repeatedly since 2025.
• Assuming everything sells. Run a version where a quarter of the order goes at clearance prices.

Frequently asked questions

What is a good net margin for a wholesale buyer?

There is no single figure. Divide your monthly overheads by expected unit sales and treat the result as your minimum profit per unit. Anything below that is too thin, whatever the percentage.

Should I always ask for DDP?

No. It removes work, but you pay for that and rely on the seller to handle import formalities. Compare it with a DAP or FOB quote, line by line.

Do I have to pay duty on samples?

Often, yes. The US exemption is suspended, the EU relief has ended and the UK relief is due to go, so budget for a charge and ask your broker.

How accurate does my estimate need to be?

Accurate enough that an honest error does not change your decision. Get real quotes for the largest items, usually goods, freight and duty. If a 10% rise in freight turns profit into loss, the deal is too thin.

Your next steps before placing the order

1. Find the product's tariff code in the official tariff for your destination.
2. Send the quote request above to at least three suppliers, found through our directory or the steps in how to find wholesale suppliers.
3. Get a freight quote, a broker's quote and your bank's real exchange rate.
4. Confirm the duty rate and any extra duties that day.
5. Run each offer through the margin calculator with a defect allowance.
6. Write down your break-even and target prices, and check that the market pays them.
7. Before you pay, run the checks for spotting a fake supplier. We do not guarantee any supplier and are not a party to your deal.
8. Keep the invoices and recalculate after the first shipment, so the next estimate starts from real numbers.