How to calculate the landed cost of an import
What goes into landed cost, why the VAT on the DIM is not a cost, how to allocate charges and how to move from provisional cost to the final settlement.
The container arrived three weeks ago and you have already sold part of the goods. Today the customs broker’s invoice shows up, and with it the uncomfortable question: what did each product really cost you? If the selling price was set on the supplier’s invoice plus a rough “expense percentage”, the margin you think you have may not exist.
Landed cost is the sum of everything you had to pay to get the goods into your warehouse and ready to sell. Getting it right does not require a system. It requires a method.
What goes into landed cost
| Component | Part of cost? | Notes |
|---|---|---|
| Invoice value (FOB or another Incoterm) | Yes | The base for everything. Check what it includes under the agreed Incoterm. |
| International freight | Yes | If the Incoterm does not include it. |
| Insurance | Yes | Same as freight. |
| Customs duty (GA) | Yes | Comes from the DIM, by tariff line. It is not recoverable. |
| Customs broker | Yes | Fees and clearance charges. |
| Inland transport to your warehouse | Yes | From customs or the border to your warehouse. |
| VAT on the DIM | No | It is a tax credit, not a cost (see below). |
| Bank fees on the transfer | Usually not | Typically treated as a financial expense. |
| Storage after receipt | No | A period expense, no longer an acquisition cost. |
Duties by tariff line are covered in our 2026 Customs Tariff guide.
Why the VAT on the DIM is not a cost
When you clear the goods, the DIM (the Bolivian import declaration) assesses customs duty and import VAT. You pay both, but they are not treated the same way:
- Customs duty is a final cost: you do not get it back, so it belongs in the product’s cost.
- Import VAT, if your company is a VAT taxpayer, is recorded in the purchase ledger and used as a tax credit against the VAT on your sales. If you add it to cost, you count it twice: once when you recover it and again when it flows into cost of sales.
Check the treatment of your specific case with your accountant, especially if you have exempt operations or are not a VAT taxpayer.
Allocation bases: which one and when
Almost every charge belongs to the whole shipment and has to be split among products. The underlying rule: allocate each charge according to what caused it.
| Base | Use it for | Formula per product |
|---|---|---|
| Value (FOB) | Insurance, broker fees, charges that depend on the amount | Charge × (product FOB ÷ total FOB) |
| Weight | Air or road freight, inland transport priced per ton | Charge × (product kg ÷ total kg) |
| Volume | Consolidated ocean freight (LCL), storage priced per m³ | Charge × (product m³ ÷ total m³) |
| Tariff line | Customs duty | The amount the DIM assesses for that product’s tariff line |
Allocating everything by value is the most common shortcut and the most misleading: a cheap, heavy product ends up subsidized by an expensive, light one.
The exchange rate of each document
Each foreign-currency document is recorded at the exchange rate of its own date: the commercial invoice at the invoice rate (or the receipt rate, depending on your policy), freight at the rate of its invoice, the DIM at the rate stated on it. What matters is that every line of the calculation states which document and which date its exchange rate comes from.
What you pay more or less because the rate moved between invoice and payment (for example, an advance paid weeks earlier) usually does not go into product cost but into exchange differences. Agree on the policy with your accountant and apply it consistently.
Worked example
Suppose a shipment with three products, all in USD to keep it simple:
| Product | Units | FOB (USD) | Weight (kg) |
|---|---|---|---|
| A | 1,000 | 10,000 | 2,000 |
| B | 500 | 6,000 | 3,000 |
| C | 200 | 4,000 | 1,000 |
| Total | 20,000 | 6,000 |
Charges: international freight USD 1,800 (by weight), insurance USD 200 (by value), broker USD 400 (by value), inland transport USD 600 (by weight). The DIM assesses customs duty of USD 1,000 for A, USD 300 for B and USD 400 for C, plus VAT that does not enter the calculation.
| Product | FOB | Freight | Insurance | Duty | Broker | Inland | Total | Unit cost |
|---|---|---|---|---|---|---|---|---|
| A | 10,000 | 600 | 100 | 1,000 | 200 | 200 | 12,100 | 12.10 |
| B | 6,000 | 900 | 60 | 300 | 120 | 300 | 7,680 | 15.36 |
| C | 4,000 | 300 | 40 | 400 | 80 | 100 | 4,920 | 24.60 |
Check: 20,000 + 1,800 + 200 + 1,700 + 400 + 600 = 24,700, equal to the sum of the totals. If it does not tie out, there is a rounding error or a misallocated charge; assign the rounding difference to a single line (for example, the heaviest one) so it closes exactly.
Had you allocated freight by value, B would have carried USD 540 instead of 900, and its unit cost would be 14.64 instead of 15.36: almost 5% lower. A price set on that number carries a margin that does not exist.
Provisional cost and final settlement
Goods are sold before the last invoice arrives. That is why it pays to work in two stages:
- On receipt, value the goods at a provisional cost: FOB × exchange rate × an estimated factor (for example, 1.20 if your previous shipments added about 20% in charges).
- Record each charge first at its estimated amount and replace it with the actual one when the invoice arrives. Note the variance.
- Settle once all charges and the DIM are in: calculate the final cost per product.
- Split the difference between what is still in stock and what has already been sold.
Continuing the example: A came in at a provisional 12.00 and its final cost is 12.10. If you have already sold 400 units, the difference of 0.10 × 400 = USD 40 goes to cost of sales, and 0.10 × 600 = USD 60 adjusts the remaining inventory. No need to redo the sales.
Common mistakes
- Adding the VAT on the DIM to product cost.
- Allocating every charge by value, freight included.
- Using a single exchange rate “from the day I built the spreadsheet” for everything.
- Never closing the settlement, so the provisional cost stays forever.
- Forgetting inland transport or charges that arrive late.
- Putting post-receipt storage into product cost.
Per-shipment checklist
- Commercial invoice with a clear Incoterm and its exchange rate.
- Weight and volume per product (from the packing list).
- Each charge with its allocation base defined.
- DIM with duty by tariff line; VAT kept apart as a tax credit.
- Sum of allocated costs equal to the sum of charges.
- Settlement closed and the difference split between stock and cost of sales.
If you want to automate it
This method works in a well-built spreadsheet. As shipments multiply, an ERP like MKA can keep each shipment in an import file, allocate each charge on the base you choose, keep the VAT on the DIM as a tax credit and split the settlement difference between stock and cost of sales (see the imports module).