# How to calculate the landed cost and price your imported products

### Calculating the price of imported (or locally sourced) products

The main trick is to ensure you have all of your costs accounted for. You’d be amazed at all the associated costs that creep up when getting a product from a suppliers’ warehouse to your virtual shelves and ready to ship. Freight charges, payment fees, custom duties, document fees, handling fees… the list goes on, and all need to be factored in.

Below you’ll see a snippet from a courier invoice which highlights the total amounts payable once your order is ready to clear through customs. On this invoice you’ll notice totals for VAT and custom duties. Some products are eligible for custom duties but everything you import will have VAT added to it. The VAT is calculated at 14% of the goods value based on the current Rate of Exchange (ROE). So for example, an order of £500 with an ROE of R18.3/£1 would have a customs value of ±R9150. This amount is also the base used to determine the custom duties payable. Custom duties differ from country to country and also depend on the country you’re importing from. Importing from EU countries will have a different duties rate to SADEC member states. The following website: FTW Online is a great resource for checking the tariff amounts of products coming into South Africa.

From below we can see that the supplier order has duties for the amount of R4260.20 and VAT for R3876.74 as well as a disbursement fee from the courier of R45.57. Now if you know that all products in the shipment will attract duties then your pricing of these products will take the duties paid, divided by the customs order value. In this case that would be R4,260.20 / R24,567.00 which is 0.173 or 17.3%. So you know that the items in the order will attract a 17.3% custom duties charge every time you import these products.

Example of VAT and duties invoice from a courier

However it’s important to go to the customs worksheet at the back of this document to see the breakdown of which products have attracted the duties as some may be free from duties and don’t need the 17% factored into the cost price. Below you’ll see a snippet from this worksheet. From here you can see, line by line, what the tariff code declared is and the total duties and VAT that makes up the final total.

Note: don’t always rely on the customs person to declare your products correctly and use the correct tariff. Double check to ensure they are using the correct tariff heading and ask them to change it if they are not. This could mean that you’re paying import duties when you’re not supposed to.

Customs worksheet example

So once you have all of the associated costs involved with getting your product from the supplier and onto your warehouse floor you have a good idea of what the true Landed Cost will be. The landed cost is made up of the goods value (supplier price X ROE) plus all the shipping, duties and ancillary costs. You must also factor in the handling and associated costs you or your warehouse might encounter. An example would be large products that need extra work to be sorted or packed away, small fiddly products that need to be organised and labelled for example – all of these while maybe not direct costs due translate into billable man hours.

The pricing formula would be as follows:

Cost of goods (multiplied by ROE) + freight and shipping costs + duties and fees + markup + VAT = Selling price

It’s ethical practice to separate these costs when calculating the markup, and only markup the cost of goods portion, with everything else being charged at cost value. If you’re calculating pricing in a volatile period and you’re almost certain that your currency will slide in the next few months, then factor in a pricing buffer on the cost of goods.

Below is an invaluable tool I’ve created and use to price imported products. It allows you to add all the import costs to get to a selling price. It will also tell you the profit margin at a particular selling price. It’s very easy to use and all you need to do is input the Unit price, Forex rate, shipping % (which is your raw freight costs / total goods value), duties fees %, and your markup %. There’s also a commission field in there if you’d like to give a commission to affiliates or advertising costs, or sales people and need to factor in that too. You’ll notice in the central part there are 2 calculators for working out your markup and below that your desired margin. I hope you find it useful.

1. Hi Mister Mantality,

Thank you very much for this article, it’s very clear and helping me a lot as I was trying to figure out formulas but not sure of me ! One question..

In my case, I’m buying goods in South Africa and Resell them in France.
I’m at both export and import positions. When it comes to the seafreight quote, which price should I give them ? Costing price + markup ? only costing price ?

I’m a bit lost on this part. Goods will be invoiced directly from my company operating in South Africa to Customers in France.

Hope you will be able to help and thanks again !

• Hi Romain,

Thanks for your comment. Best bet would be to add a small markup of 2-5% onto the freight cost (and give them that price) this is to account for any unforeseen fees and charges that can creep up. Also see if they can arrange the freight from their side as it’s almost always cheaper.

2. info on ecommerce and pricing products

3. The calculations are good to start with, however, they don’t represent the complete reality. There are many other costs like local freight, import freight, Paypal fee/bank transfer fee, Anti-dumping duty, etc. Calculating the freight itself is tricky because of different modes of transportation and different billing structure of each transportation mode.

But, thanks for the article. It may give insight to people who are starting off from level 0.

Amit

4. This is very informative. Thank you Guys.