What is landed cost?
Landed cost is the full cost of a purchased item once it reaches your warehouse. It is the price you paid plus the freight, insurance, customs duty, brokerage and other costs of getting it there, usually per unit. A distributor's margin should be measured against it, because it is what the stock actually cost.
The accounting rule says the same. Under IAS 2, the inventory standard, the cost of purchase includes the purchase price and the import duties and other taxes that cannot be recovered. It also includes transport, handling and other directly attributable costs. Trade discounts and rebates come off. GST that a registrant claims back is a recoverable tax, so it stays out.
How to calculate landed cost
Landed cost of a line = purchase price × exchange rate + its share of shipment costs + duty + added tariffs + taxes you cannot recover
Landed cost per unit = landed cost of the line ÷ quantity
Price at a target margin = landed cost per unit ÷ (1 − margin)
- Enter each line: the item, the quantity, the unit price in the supplier's currency and the weight per unit. Add the duty rate and any added tariff or surtax rate.
- Enter the exchange rate. The CBSA converts at the Bank of Canada rate on the date of direct shipment, and the Bank publishes daily exchange rates.
- Enter freight, insurance, brokerage and other costs, each in your currency or the supplier's, and choose how each one is shared between the lines.
- Choose the country of import and what the duty is charged on. In Canada, say whether you are registered for GST/HST.
- Set a target margin to see the selling price and the markup it takes.
See every price that fell behind landed cost
Tell Derik where your costs and prices live today, in the ERP and in spreadsheets. He will tell you what a four-week build would cover.
Start a conversationA worked example
A Canadian distributor of heating supplies receives three lines from a US supplier, invoiced in US dollars and converted at 1.37. Freight of $1,450 is shared by weight, US$85 of insurance by value and $165 of brokerage by value. The exchange rate and the duty and surtax rates are made up to show the method. Look up the real duty rate for each item in the Customs Tariff.
| Line, per unit in CAD | Qty | Price | Freight and costs | Duty and surtax | Landed cost | Uplift | Price at 35% margin |
|---|---|---|---|---|---|---|---|
| Circulator pump, 1/6 hp | 24 | $254.82 | $22.75 | $0.00 | $277.57 | 8.9% | $427.03 |
| Diaphragm expansion tank, 15 L | 30 | $88.37 | $25.15 | $5.74 | $119.26 | 35.0% | $183.48 |
| Brass ball valve, 1 in | 200 | $15.41 | $2.15 | $3.85 | $21.42 | 39.0% | $32.95 |
The ball valves cost $15.41 at the supplier's price and land at $21.42, 39.0% more, mostly because of the 25% surtax. The whole shipment lands at $14,523.52, 22.6% over the purchase price. The 5% GST paid at the border, $639.60, comes back as an input tax credit, so it is not in the landed cost.
Which value the duty is charged on
- Canada. Section 48 of the Customs Act adds the cost of moving the goods to the place they ship directly to Canada from. The cost of carrying them on from there is left out. CBSA memorandum D13-3-3 explains which transport costs count.
- United States. 19 U.S.C. 1401a leaves the cost of transportation, insurance and related services for the international shipment out of the transaction value.
- European Union. The customs value includes transport and insurance up to the point where the goods enter the EU.
Leave Duty is charged on at goods value for Canada and the US. In Canada, freight you pay separately to the place of direct shipment is part of the value for duty. Add it to the unit price.
GST and HST on imported goods
On commercial imports, the CBSA collects 5% GST at the border, calculated on the value of the goods and the duties. The Canada Revenue Agency explains that the provincial part of the HST is not payable at the border on commercial goods. The importer may have to self-assess it. A registered importer claims the tax back as an input tax credit when it meets the usual conditions. Untick Registered for GST/HST if your business cannot, and the GST joins the landed cost.
US entry fees and added tariffs
For imports into the United States, the calculator can add two fees, each shared between the lines by value:
- Merchandise processing fee. 0.3464% of the value on a formal entry. Under CBP Dec. 26-14, the minimum is $34.58 and the maximum $670.86 for fiscal year 2027, from October 1, 2026. CBP adjusts the limits each year, so the fields stay editable.
- Harbor maintenance fee. 0.125% of the value of cargo loaded or unloaded from a ship, under 19 CFR 24.24. Leave it off for goods that arrive by truck or air.
A shipment worth $2,500 or less can usually be entered informally. The exception is an article over $250 classified in Chapter 99, subchapter III or IV, where US Section 232 and 301 tariffs sit. An automated informal entry pays a flat $2.77 MPF in fiscal year 2027. Enter it under Other.
Added tariffs change faster than duty rates. Canada's United States Surtax Order (2026) has applied since September 8, 2026. It charges 15%, 25% or 50% of the value for duty on listed US goods, as CBSA Customs Notice 26-23 sets out. Check Canada's tariff responses and CBP's Section 232 FAQs before each quote, and put the rate for each line in Added tariff %.
Allocating freight by value, weight or quantity
A shipment cost has to be shared between the lines it carried, and the basis changes the answer. Freight usually follows weight, insurance follows value, and a flat brokerage fee can follow value or quantity. In the example, sharing freight by value instead of weight moves cost from the heavy tanks to the valuable pumps. The tank falls from $119.26 to $107.02, and the pump rises from $277.57 to $292.06.
From landed cost to selling price
A 35% margin on the valve's landed cost of $21.42 gives a price of $32.95, a markup of 53.8%. Margin is measured on the price and markup on the cost, so the same gap in dollars gives two different percentages. The markup calculator converts between them, the guide to distributor pricing covers multipliers and list prices, and cost-plus pricing explains prices built up from cost.
How AI keeps landed costs and prices current
Landed cost moves with every shipment, because the exchange rate and the freight bill change. A price set from last year's landed cost can fall behind without anyone noticing. A margin system built on your invoice lines compares every active price with current cost, including landed cost for a distributor. It drafts a new price wherever the margin fell below your floor, and a person approves each one. See margin and pricing intelligence.