The single most common costing mistake in China sourcing is treating the factory's unit price as the cost. Landed cost — the true, all-in cost of getting one unit into your warehouse — is routinely 20 to 40% higher than the quote, sometimes far more for bulky goods. Build it before you negotiate, not after the invoices arrive.

Start with the Product Cost

Begin with the factory's unit price, and confirm exactly what it includes. Does it cover export packaging, inner cartons and master cartons? Is it ex-works or FOB? Two quotes are only comparable once you know they cover the same scope.

Add Origin Charges

Getting the goods from the factory floor onto the ship costs money: inland transport to the port, origin terminal handling, export customs clearance and documentation. Under an FOB price these are already included; under EXW they are on your account and must be added explicitly.

Add Freight and Insurance

Ocean or air freight is the line that moves the most. Freight rates are volatile — get a current quote, never reuse last year's figure. Add marine cargo insurance: it is a small percentage of cargo value and the cheapest protection you will ever buy.

Add Duty and Import Tax

Import duty is set by your product's HS code and origin; import VAT or GST is charged on top in most countries. These depend entirely on the destination, so use your country's tariff schedule — and remember VAT is often recoverable for registered businesses, while duty is not.

Add Destination Charges

At the arrival port the meter is still running: terminal and port handling, customs broker fees, and inland delivery from the port to your warehouse. For less-than-container-load shipments, destination handling can be a surprisingly large share of a small order's cost.

Add the Costs Everyone Forgets

  • Financing cost of a deposit sitting with the supplier for weeks before you have goods to sell
  • Currency — the FX spread and any wire fees on international payments
  • Inspection — third-party quality inspection per order
  • Tooling — amortise any one-off mould or tooling cost across the production run
  • Defect allowance — a realistic provision for rejects and returns
A Planning Rule of ThumbUntil you have real quotes for every line, a rough planning landed cost is the FOB price plus 25–40% to cover freight, duty, tax and destination charges combined — wider for bulky low-value goods, narrower for compact high-value goods. Use it only to sanity-check a deal, then replace every estimate with a real figure before you commit.

Work Per Unit, Not Per Shipment

Total every line for the shipment, then divide by the number of units. Per-unit landed cost is the only number that lets you compare suppliers fairly and price your product with a margin you can actually keep.

Why It Changes the Decision

Landed cost regularly overturns the obvious choice. A supplier with a lower FOB price but a bulkier product can lose to a pricier supplier once freight is added — because you ship air, not value. Run the full calculation for each shortlisted supplier and you will sometimes find the "expensive" quote is the cheapest place to land your goods.

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