Landed Cost vs FOB Price: What's Included and How to Calculate It

Landed cost = FOB price + international freight + insurance + duties + U.S. entry fees + broker, port and inland delivery charges. For U.S. imports the Merchandise Processing Fee is 0.3464% of value (FY2027 minimum $34.58, maximum $670.86) and the Harbor Maintenance Fee on ocean cargo is 0.125%.

Quick answer: An FOB price covers the goods plus the seller’s costs to get them loaded on the ship at the origin port, including export clearance. Everything after that is yours: ocean freight, insurance, U.S. duties and fees, the customs broker, port charges and trucking to your door. Add those up and divide by units to get landed cost per unit, the number your pricing and margins should be built on. In the illustrative example below, a $12.00 FOB unit lands at $14.94.

Sources: Incoterms® 2020 rule summaries from the ICC Academy and trade.gov; U.S. fee rates from CBP Dec. 26-14 (Federal Register, July 31, 2026), effective October 1, 2026, and 19 CFR 24.24; de minimis status from the June 24, 2026 CBP rule. Checked October 30, 2026.

This post is about the math. For what FOB Origin and FOB Destination mean for ownership, risk and freight claims on domestic shipments, see FOB Shipping Explained.

What an FOB Price Includes

Under the Incoterms® 2020 FOB (Free on Board) rule, the seller delivers the goods loaded on board the vessel the buyer nominates at the named port of shipment, and risk passes to the buyer at that point, per the ICC Academy’s FOB guide. So an FOB quote such as “$12.00 FOB Ningbo” normally covers:

• The goods themselves, packed for export
• Transport from the seller’s factory to the port of shipment
• Loading on board the vessel
• Export customs formalities in the origin country

It does not cover the main sea freight, insurance, import clearance or anything at the U.S. end. Under FOB the buyer contracts the carrier, pays port-to-port freight and handles import formalities. Two cautions from the ICC: FOB is a sea and inland waterway rule, and for containerized goods handed over at a container terminal, FCA (Free Carrier) is the better fit. Many suppliers still quote “FOB” for container loads, so confirm what the price actually includes.

What Landed Cost Adds

Landed cost is the full cost of getting the goods into your warehouse, ready to sell. On top of an FOB price, a U.S. importer typically pays:

• International freight: ocean or air, origin port to U.S. port.
• Cargo insurance: under FOB, the transit risk is yours from the moment the goods are on board.
• Customs duties: the rate depends on the product’s HTS classification and country of origin, including any additional tariffs in force.
• Merchandise Processing Fee (MPF): a CBP fee on formal entries (below).
• Harbor Maintenance Fee (HMF): on cargo unloaded from a commercial vessel at a covered U.S. port.
• Customs broker fees: entry filing and related services.
• Destination port and terminal charges.
• Inland freight: drayage, LTL or parcel from the port to your warehouse.
• Carrier accessorials: detention, demurrage, chassis, liftgate, residential or other surcharges when they apply.

U.S. Import Fees: Current Rates

CBP adjusts the MPF minimum and maximum for inflation every fiscal year. The FY2027 notice raised them from $33.58 and $651.50 (FY2026) to $34.58 and $670.86, and confirms that the 0.3464% rate itself is unchanged. The formal-entry rate and its value basis are in 19 CFR 24.23; the 0.125% port use fee is in 19 CFR 24.24, which bases it on the same appraised value used for duty. Products qualifying under certain free trade agreements, including USMCA, are exempt from the MPF.

Duty is figured on the goods, not the freight. U.S. customs value is the price paid for the goods, excluding the cost of international transportation and insurance (19 U.S.C. 1401a(b)(4)(A)). That is why the duty, MPF and HMF lines in the example below are calculated on the FOB value. If you buy CIF, keep freight and insurance itemized on the invoice so they can be backed out.

How to Calculate Landed Cost: Worked Example

All prices and quotes in this example are illustrative, not market rates. The MPF and HMF rates are the real FY2027 rates. Scenario: one ocean container, 2,000 units, formal entry, a hypothetical 5% duty rate and no additional tariffs.

The formula: landed cost per unit = (FOB value + freight + insurance + duty + MPF + HMF + broker + port + inland freight) / units. Here that’s $29,883.14 / 2,000 = $14.94 per unit. With mixed SKUs in one container, allocate freight by value, weight or cubic volume.

FOB vs CIF vs DDP: What the Buyer Still Pays

Summaries from the ICC Academy guides to FOB, CIF and DDP; the official rule text is in ICC publication 723. Under CIF, risk passes at the origin port even though the seller pays freight, so a loss at sea is the buyer’s problem. Under DDP the seller must handle U.S. import clearance, which the ICC notes can be difficult for a foreign seller. Incoterms rules also don’t set the price or decide when title passes, per trade.gov. Compare suppliers on landed cost per unit, never on the quoted price alone.

Low-Value Imports: De Minimis Is Suspended

Parcel shipments of $800 or less used to enter duty-free under Section 321 de minimis. Not anymore:

• August 29, 2025: CBP began implementing Executive Order 14324, suspending duty-free de minimis treatment for covered goods valued at $800 or less from all countries.
• June 24, 2026: a CBP rule suspended the exemption indefinitely for all modes other than the international postal network, effective that day. A separate rule for mail took effect July 24, 2026.
• Result: these shipments now need formal or informal entry, per CBP’s e-commerce FAQ. Informal entry is generally available up to $2,500; formal entry is required above that and for some goods. CBP has pushed the compliance date for the new informal entry procedures for international mail to January 20, 2027 (CBP e-commerce page).

For brands that import inventory by express parcel, duty, entry fees and carrier brokerage now belong in every landed cost calculation. See UPS Import C.O.D. charges for how those bills arrive.

Using Landed Cost Per Unit for Pricing and Margins

Continuing the example, say you sell the item wholesale at $24.00:

Pricing off FOB overstates margin by about 12 points here. To hit a 50% gross margin on landed cost, the price must be landed cost / (1 - 0.50) = $29.88. Practical rules:

• Book inventory at landed cost so cost of goods sold reflects freight, duty and fees.
• Recalculate when inputs move: freight quotes, duty rates and tariffs, and the MPF caps each October.
• Use actuals: reconcile estimates against the broker’s entry summary and carrier invoices, including accessorials billed after delivery.

Frequently Asked Questions

What is the difference between FOB and landed cost?

FOB is the price of the goods loaded on the ship at the origin port, including the seller’s export costs. Landed cost adds everything after that: international freight, insurance, U.S. duties, the Merchandise Processing Fee, the Harbor Maintenance Fee, broker fees, port charges and inland delivery to your warehouse.

What fees are included in an FOB price?

Under Incoterms® 2020 FOB, the price covers the goods, transport to the port of shipment, loading on board the vessel and export clearance. Ocean freight, insurance and all import costs are the buyer’s.

How do you calculate landed cost per unit?

Add the FOB value, international freight, insurance, duties, MPF, HMF, broker fees, port charges and inland freight, then divide by the number of units. In our illustrative example, $29,883.14 for 2,000 units is $14.94 per unit against a $12.00 FOB price.

Is U.S. customs duty charged on the FOB or CIF value?

U.S. customs value excludes international freight and insurance (19 U.S.C. 1401a), so duty, MPF and HMF are calculated on the value of the goods, which for an FOB purchase is essentially the FOB price.

What is the Merchandise Processing Fee in 2026?

For formal entries it is 0.3464% of the value of the goods. For fiscal year 2027, which began October 1, 2026, the minimum is $34.58 and the maximum is $670.86 per entry (FY2026: $33.58 and $651.50).

Is FOB or DDP cheaper?

A DDP price looks higher because it includes freight, duties and import clearance. Compare landed cost per unit: convert the FOB quote to landed cost and set it against the DDP price plus your unloading and any costs beyond the named place.

Related Reading

• FOB Shipping Explained: Origin vs Destination & What It Means for Your Costs
• DDU to DDP: What DHL's EU Change Means for U.S. Shippers (2026)
• UPS Import C.O.D. (ICOD) Charges: What They Are and How to Pay
• Shipping Audit Guide 2026: What It Covers, What It Costs & How It Works
• How to Read a Carrier Contract: The Clauses That Actually Determine What You Pay

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This article is for informational purposes only. Carrier rates, surcharges, and policies change frequently — always verify current terms directly with the carrier for your specific situation. Have questions? Reach out to us — we're happy to help.