The True Landed Cost of Sourcing From China (It's Not the Unit Price)

A supplier quotes you $4.20 a unit. That number feels like the answer to "what does this cost?" It isn't. It's the starting point of a calculation that most first-time importers get wrong, and the gap between unit price and true landed cost is where a lot of sourcing budgets quietly blow up.

Landed cost is what a unit actually costs by the time it's in your warehouse, ready to sell. Here's everything that goes into it, and why skipping any piece of this math leads to pricing your product wrong from day one.

Start with what the unit price actually includes

First, clarify the incoterm. A quote of "$4.20 EXW" means you're responsible for everything from the factory door onward — freight, export customs clearance, insurance, all of it. A quote of "$4.20 FOB" means the supplier gets the goods to the port and loaded, and your costs start from ocean freight onward. These aren't small differences. Confirm the incoterm before you compare quotes from different suppliers, because a cheaper EXW price and a slightly higher FOB price might actually land at the same real cost — or wildly different ones.

The line items that get added after the unit price

• Freight. Sea freight is cheaper per unit but slower and priced by container volume — costs vary a lot depending on how efficiently your product packs. Air freight is faster but priced by weight, and for bulky low-value items it can multiply your landed cost several times over.
• Duty.Import duty is calculated against your product's HS code (harmonized system classification), and rates vary significantly by product category and destination country. Getting the HS code wrong — even honestly — can mean paying the wrong duty rate or facing delays at customs.
• Customs clearance and broker fees. Usually a flat or semi-flat fee per shipment, but it's a real cost that's easy to forget when you're calculating everything on a per-unit basis.
• Insurance.Cargo insurance is cheap relative to the value it protects, and skipping it to save a small percentage is one of the more common regrets among first-time importers who've had a shipment damaged or lost.
• Inland transport, both ends. Getting goods from the factory to the port of origin, and from the port of destination to your warehouse or 3PL, both cost money and both get left out of back-of-envelope math.
• Payment and currency costs. Wire transfer fees, currency conversion spread, and in some cases trade financing costs if you're not paying 100% cash upfront.

As a rough pattern (not a rule): freight and duty combined commonly add somewhere in the range of 15-35% on top of the unit price, depending heavily on product weight, volume, and category. The only way to know your actual number is to calculate it for your specific product.

A worked example

Take a real pattern we see often: a small kitchen accessory quoted at $4.20/unit FOB. Sea freight for a mixed container works out to roughly $0.85/unit at typical volumes. Duty on the applicable HS code comes to $0.31/unit. Before you've added insurance, customs brokerage, or inland transport on your end, you're already at roughly $5.36 landed — about 28% above the quoted unit price. If you priced your product margin off the $4.20 number, you've already lost more than a quarter of your expected margin before the product even reaches you.

Why this catches people specifically at scale

A single sample order at $4.20 a unit for 50 pieces might not make the freight and duty math painful in absolute terms. The problem shows up once you're ordering thousands of units and pricing a retail product around a margin you calculated from the unit price alone. The gap doesn't shrink at scale — if anything, getting the HS code or freight assumption wrong at volume is more expensive, not less.

How to price this into your product from day one

• Get the incoterm in writing before comparing quotes across suppliers.
• Ask your freight forwarder for a real freight quote based on your actual product dimensions and weight, not a generic estimate.
• Confirm the HS code with your customs broker rather than guessing or trusting the supplier's suggestion alone — suppliers sometimes suggest a lower-duty code that isn't strictly accurate.
• Build your product margin off the landed cost, never the unit price.

Calculating true landed cost — not just the sticker quote — is one of the things we do as standard on every sourcing project, so the number you plan your business around is the real one.