Landed cost is all of these from Seller to Buyer and much more. Inctoterm is the trade term agreed by the seller and buyer. And it should be listed on the Proforma Invoice or Quote Sheet. The Incoterms rules are intended primarily to clearly communicate the tasks, costs, and risks associated with the transportation and delivery of goods.
EXW, means buyer pays everything in transport. DDP, means seller pays everything in transport. Landed Cost = EXW/FOB + To-Door Freight + Customs Fees • EXW/FOB to be paid to the seller/supplier • To-Door Freight to be paid to the freight forwarder • Customs Fees to be paid to the customs (via customs broker)
■ Landed cost, or true cost, is the process of capturing all costs associated with the acquisition of goods, enabling businesses to accurately calculate inventory valuation by including these associated costs, whether the costs are known at the time of receiving. ■ Product cost ■ + Shipping : Costs associated with crating, packing, handling, and freight ■ + Customs : Duties, taxes, tariffs, VAT, brokers fees, harbor fees ■ + Risk : Insurance, compliance, quality, safety stock cost ■ + Overhead : Purchasing staff, due diligence cost, travel, exchange rates ■ = Landed cost
Let’s Try an Example Let us suppose the shipment of 100 units of a particular product arrives ■ Supplier cost: $20 per unit ■ Duty applicable at 4% ■ Freight cost for the entire shipment was $200 – and the specific product represents one-quarter of the shipment (1/4th of the total shipment) ■ Total Landed Cost = $20 + (4% x 20) + ((200 x 25%)/100) = 20+ 0.8 + .5 = $21.3 per unit ■ Total Landed Cost = Supplier Cost + ( Duty charges ) + ( Shipment charges specific to this product/total units) • In different scenarios, your Seller may have better oceanfreight rates because of the contract volume rates with NVOCC or ocean carrier. If you select your insurance you will get full coverage and likely be less expensive than the Seller/Carrier spot rate for your shipment and less coverage.
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