Landed cost is the total cost of getting one garment from the factory to your warehouse. Brands that buy on FOB terms can see every line separately, which is exactly what makes a landed cost sheet so useful: each line can be checked, shopped around and improved.
The lines on a landed cost sheet
- FOB price per garment. The factory quote, with the named port written next to it, for example "FOB Chattogram" or "FOB Shanghai".
- Ocean freight. The forwarder's charge from the origin port to your US port. Ask for the total for the shipment, then divide it by the number of garments in that shipment.
- Origin and destination handling. Terminal handling, documentation and similar charges quoted by your forwarder.
- Cargo insurance. Optional, but sensible for a first shipment. It is usually quoted as a small percentage of the goods' value.
- Import duty. Set by the garment's classification in the Harmonized Tariff Schedule and its country of origin, and applied to the customs value of the goods. Rates vary by fabric and style, and trade measures change, so ask your customs broker to confirm the current rate for each style.
- Customs fees and broker charges. The broker's entry fee, the bond cost and the processing and harbor fees US Customs applies to sea shipments.
- Delivery to your warehouse. Trucking from the port or container yard, plus any unloading charges.
Landed cost per garment = FOB price + freight and handling per garment + insurance per garment + duty per garment + customs and broker fees per garment + delivery per garment.
A worked example (illustration only)
These figures are invented to show the arithmetic. They are not a quote and not a real duty rate. Suppose a jacket is quoted at an FOB price of 10.00 per garment. If the duty rate for that style were 10 percent, duty would be 1.00 (10 percent of the 10.00 customs value). Add freight and handling of 0.60, insurance of 0.05, broker and customs fees of 0.25 and delivery of 0.20, and the landed cost is 12.10 per garment. The factory price was 10.00, but the number that decides your margin is 12.10.
How to use the sheet
- Compare factories on the same sheet. A factory in a country with a higher duty rate can cost more overall than a pricier factory with a lower one. Only the landed cost shows this.
- Work backward from your retail price. Decide the margin you need, subtract your landed cost, and you will see how much room there is for the FOB price.
- Shop each line. Ask two forwarders to quote the same shipment. Ask your broker to confirm the duty before the order is placed, not after.
- Keep one sheet per style. Weight, fabric and construction change both freight per garment and the duty classification.
Mistakes to avoid
- Comparing an FOB quote from one factory with a delivered quote from another. Convert both to landed cost first.
- Leaving out duty because the first sample shipment looks small. Duty applies to every commercial import.
- Using an old duty rate. Check the current rate for each style before you commit to a price.
- Forgetting packaging. Ask what the unit price includes: fabric, trims, labels, polybag, hangtag and carton packing.
Next steps
Before you can use the sheet you need a customs broker and a bond, covered in our guide to setting up a customs broker and customs bond. If you would like an FOB quote for your style, with the named port and a clear unit price, get in touch. Dragon Charm manages garment production from New York across Bangladesh, China and Pakistan.