Just came across a an excellent post entitled, Nine Costs That Can Affect Your Landed Cost, on the various costs to consider when calculating the total cost for your products made overseas. Now for international product sourcing veterans, I am sure these costs seem pretty obvious, but I can tell you that my law firm’s international manufacturing lawyers often hear from companies that did not allow for many of these in determining their total cost.
So without any further ado, here are the nine costs of which you should be aware if you are going to be buying products from overseas:
1. Invoice price. If factory is quoting an FOB cost, the invoice price includes only the product cost itself and none of the costs below.
2. Shipping Costs. Sea is usually cheaper and slower than air.
3. Delivery. “Particularly with sea freight, delivery from the port of entry to your final destination is sometimes an overlooked cost for new importers.”
4. Import Taxes (Duties) “Depending on the type of product, duties can add significantly to your landed cost.” I’ll say.
6. Handling. “Ports and other parties that “touch” your cargo en route may charge a handling or processing fee.”
7. Banking Fees. Wire fees, letter of credit fees, etc.
8. Commissions. Trading companies or other intermediaries may charge a flat fee or a percentage.
9. Consulting Fees.
In the comments section, a reader added demurrage and unexpected exam fees, both of which are certainly worth noting:
These are some of the highest potentials for increasing landed costs. Demurrage is calculated at somewhere around $100 a day after the shipment has sat a port or holding facility past a particular time (10+ days). I encountered this when the original documentation for the shipment did not arrive on time to clear customs.
If you are a new importer, you are likely to be hit with US Homeland Security x-raying your container every time you import. This ranges around $400. The issue with this is if the port is busy and there is a cue then it is possible to encounter demurrage waiting for the exam.
Selecting smaller ports is usually not a good idea since they have less staff to accommodate these exams (such as Savannah GA) which entail a longer wait. Also the type of crates or pallets that your product is packaged in can also spawn an FDA exam to check for bugs. They want to check even though the container has been fumigated. If you get hit with FDA and customs exams you are looking at around $1000 in costs.