What is landed cost, and why it matters before you order

When a factory quotes you a price, that’s not what the product actually costs you. Your landed cost is the total cost of getting one unit from the factory to your door in New Zealand or the Pacific, with everything included.

What goes into landed cost

1. Factory price (USD or CNY)
2. Exchange rate to NZD
3. Freight: FCL or LCL, priced by CBM
4. Duty & GST
5. Customs clearance & port charges
6. Delivery to your door

Add those together, divide by the number of units, and you have your landed cost per unit.

Each part, explained

• Factory price: usually quoted in US dollars (USD) or Chinese yuan (CNY). Check what it includes, for example whether it’s ex-works or delivered to the port.
• Exchange rate: the rate on the day you pay is what counts. A small move in the NZD can change your margin on a big order.
• Freight: priced by volume in CBM (cubic metres). LCL means you share a container; FCL means you book a whole one.
• Duty & GST: duty depends on what the product is and where it’s made. GST is charged on imported goods as well.
• Customs clearance & port charges: the fees to lodge the import entry and release the goods at the port.
• Delivery to your door: getting the goods from the port to your home, shop or warehouse.

Why it matters before you order

If you only look at the factory price, a product can seem like a great deal and still lose money once freight, duty, GST and charges are added. Working out the landed cost first tells you:

• whether the product is worth importing at all
• what price you need to sell at to make your margin
• whether a bigger order (or a full container) brings the cost per unit down enough to be worth it

How NZ Customs works out duty and GST

Two of the costs above are set by New Zealand Customs rules, so it helps to know how they’re calculated:

• Customs value: generally the price you paid for the goods, including things like packing and transport costs up to the point the goods leave the exporting country. International freight and insurance after that point can be left out if they’re shown separately from the price. (NZ Customs)
• Currency: the Customs value must be in NZ dollars. If you paid in USD or CNY, it’s converted using Customs’ published rates on the day the import entry is lodged, which may differ from the rate on the day you paid the factory. (NZ Customs)
• Duty: calculated on the Customs value, at the rate for your product’s tariff classification. Some goods are duty-free, and goods from China may qualify for a lower rate under the NZ-China Free Trade Agreement if the rules of origin are met. (NZ Customs)
• GST: 15%, calculated on the Customs value plus any duty plus your shipping and insurance costs. So freight counts for GST even when it’s left out of the Customs value. (NZ Customs)

If you’re GST-registered, you can usually claim the import GST back in your GST return, but you still need the cash to pay it when the goods arrive. Make sure it’s in your cash flow plan. Before your first order, also check the 5 things to sort before your first shipment and read my beginner’s guide to importing from China.

How I help

For every client order, I work out the landed cost per unit before you pay the supplier. That way you decide with the real numbers in front of you, not just the factory quote.