What Is Landed Cost?
Landed cost is the full cost of delivering a product to an international customer, including the product, freight, insurance, import duties, taxes, customs clearance, and final delivery. It shows what an overseas order actually costs your business—not just what you paid your supplier.
For Shopify merchants, an accurate landed cost helps set market-specific prices and choose between absorbing import charges or collecting them from customers. Leaving out a fee can make an apparently profitable international order unprofitable once it reaches the customer.
International Landed Cost Formulas
CIF Value = Product Value + International Freight + Insurance
Import Duty = CIF Value × Duty Rate
VAT/GST = (CIF Value + Import Duty) × VAT/GST Rate
Landed Cost per Unit =
Product Value per Unit
+ Freight per Unit
+ Insurance per Unit
+ Duty per Unit
+ VAT/GST per Unit
+ Broker Fee per Unit
+ Last-Mile Shipping per Unit
+ Compliance Cost per Unit
International Margin = ((Selling Price − Landed Cost per Unit) ÷ Selling Price) × 100
Margin Erosion = Domestic Margin − International Margin
For shipment-level costs, divide freight, insurance, broker fees, and compliance costs by the shipment quantity before adding them to the per-unit total. Actual duty and tax treatment depends on the product classification, destination, importer of record, and whether you can recover VAT/GST.
How to Use This Calculator
- Enter Product Value — the declared product price per unit, usually the FOB or ex-works value.
- Enter Quantity — the number of units in the shipment. The calculator uses it to allocate shipment costs per unit.
- Add International Shipping and Insurance — enter the shipment’s freight cost and cargo insurance cost, not a per-unit amount. Compare carrier options with the Shipping Cost Calculator (Zone-Based); for air parcels, check billable weight with the Dimensional Weight Calculator.
- Enter Duty Rate and VAT Rate — use the rates that apply to the product’s HS code and destination. The Duty & Tariff Estimator can help compare tariff scenarios.
- Add Broker Fee, Last-Mile Shipping, and Compliance Cost — include customs clearance, delivery after import, and per-shipment costs such as testing or labeling.
- Enter Selling Price and Monthly Units — these inputs help assess international profitability and the effect of sales volume on the market estimate.
- Set Exchange Rate — enter 100 if no conversion adjustment is needed; otherwise enter the percentage of value retained after currency conversion.
Step-by-Step Example
Suppose a Shopify store ships 100 candles to a market where it sells each one for $65. The shipment costs and rates below are illustrative; verify the actual tariff and tax treatment for your destination.
| Cost item | Calculation | Per unit |
|---|---|---|
| Product value | $25.00 | $25.00 |
| International freight | $450 ÷ 100 | $4.50 |
| Insurance | $25 ÷ 100 | $0.25 |
| CIF value | $25.00 + $4.50 + $0.25 | $29.75 |
| Import duty | $29.75 × 4.5% | $1.34 |
| VAT | ($29.75 + $1.34) × 21% | $6.53 |
| Broker fee | $75 ÷ 100 | $0.75 |
| Last-mile shipping | $3.50 per unit | $3.50 |
| Compliance cost | $50 ÷ 100 | $0.50 |
| Estimated landed cost | Sum of per-unit costs | $42.37 |
At a $65 selling price, estimated profit before other operating costs is $65 − $42.37 = $22.63 per unit. The resulting margin is $22.63 ÷ $65 × 100 = 34.8%; compare it with your domestic margin to decide whether the market supports the same price.
DDP vs. DAP: Who Pays at Delivery?
Under DDP (Delivered Duty Paid), the seller arranges and pays applicable import charges, so customers are less likely to face unexpected fees at the door. Under DAP (Delivered at Place)—often called DDU in older shipping terminology—the customer generally handles import charges, which can cause delivery delays or refused parcels.
For Shopify sales, compare the conversion and cost tradeoff: DDP gives customers a clearer checkout total, but you must price duties, taxes, and clearance into the sale. Shopify Markets can support international market and pricing setup, but confirm how your carrier and checkout handle duties before promising a delivered price. Customs classification and import requirements vary; the U.S. Customs and Border Protection import guide explains U.S. import procedures, and the EU VAT overview describes VAT rules in the EU.
Landed-Cost Planning Benchmarks
These ranges are screening estimates, not guaranteed rates. Product classification, trade agreements, origin, destination, and carrier contract can change the actual amount.
| Cost driver | Planning range | What to verify |
|---|---|---|
| International freight for small parcels | $3–$8 per unit | Shipment size, service speed, and billable weight |
| Import duty | 3–15% of CIF value | HS code, country of origin, and destination tariff |
| VAT/GST or similar consumption tax | 10–25% | Tax base, registration rules, and recovery eligibility |
| Total landed cost above domestic COGS | 30–60% | Freight, taxes, broker fees, compliance, and delivery |
Use official tariff schedules rather than a broad range when setting final prices. For U.S. imports, the USITC Harmonized Tariff Schedule provides tariff information by classification; for international postage, check current USPS international mailing prices.
6 Tips to Protect International Margins
- Test a higher market price: change a $48 international selling price to $54 and compare the margin before updating your Shopify Markets price list.
- Compare shipping methods: test a freight quote that is $2 less per unit; confirm the slower service does not increase delivery complaints or refund costs.
- Check a second tariff classification: ask a customs broker to confirm the HS code if a product’s materials or intended use could change its duty rate.
- Model exchange-rate headroom: change the exchange adjustment from 100% to 97% to see whether a weaker conversion rate would make the market unprofitable.
- Test a free-shipping threshold: compare the current threshold with an order minimum $12 higher using the Free Shipping Threshold Optimizer. A larger basket can spread fixed fulfillment costs across more items.
- Review delivery surcharges: test a different delivery speed or destination zone with the Last-Mile Delivery Cost Calculator before advertising a flat international shipping price.
Frequently Asked Questions
What is landed cost and what does it include?
Landed cost is the total cost of getting a product from your warehouse to an international customer’s door. It can include product cost, international freight, insurance, duties, VAT/GST, customs broker fees, last-mile delivery, and compliance costs such as labeling or testing. The final amount depends on the product and destination.
How are import duties calculated?
Import duties are generally calculated using a customs value that includes the product and, depending on the destination’s rules, freight and insurance. The applicable rate depends on the product’s HS code, origin, and destination, so confirm the classification and rate before publishing market prices. The Duty & Tariff Estimator can help compare scenarios.
Is VAT calculated on top of duties?
In many import systems, VAT or GST is assessed on a tax base that includes customs value and import duty, so duty can increase the tax due. The exact tax base and whether a registered business can recover import VAT depend on local rules and the importer’s status.
How much does international shipping erode margins?
The impact varies by product value, shipping method, destination, and tax treatment; freight and import charges can materially reduce the margin left after a sale. Compare the calculator’s international margin with your domestic margin, then test a higher price, lower-cost service, or eligible trade preference if the gap is too large.
What is DDP vs DDU shipping?
DDP means the seller pays applicable duties and taxes, while DAP generally leaves import charges for the customer to pay when the parcel arrives. DDP can reduce surprise fees at delivery, but it requires you to estimate and collect those costs correctly; confirm the carrier’s service terms and checkout configuration before offering it.
About This Calculator
The International Landed Cost Calculator was built by Luis Dev Studio for Shopify merchants comparing international markets and pricing. For help with international store setup or fulfillment, explore our services or contact us.
Updated by Luis Gonzalez · Feb 22, 2026