The price a factory quotes is not what a garment costs you. By the time it reaches your warehouse it has picked up freight, insurance, and, for fashion above almost any other product, a heavy import duty. Landed cost is the number that captures all of it, and it is the only honest basis for pricing and sourcing.
This guide covers what landed cost is, the components and formula, a worked apparel example, why it bites hardest in fashion, and how it should shape where you source.
What is landed cost?
Landed cost is the total cost of getting a product from its origin to your door, ready to sell. It is the product price plus every cost incurred along the way: shipping, customs duties and taxes, insurance, and handling.
The point is simple but easy to forget: the factory or wholesale price is only the start. Two suppliers quoting the same unit price can land at very different real costs once freight and duty are counted, which is why buying on the quoted price alone is a trap.
The components of landed cost
Landed cost is the sum of a handful of line items. The main ones:
- Product cost: the unit price you pay the factory or supplier, usually the FOB or ex-works price.
- Freight and shipping: ocean, air, or road transport from origin to destination, plus any inland trucking.
- Customs duties and taxes: the import duty on the goods, plus any other border taxes and fees; for apparel this is a big one.
- Insurance: cover against loss, theft, or damage in transit, priced on the value and category of the goods.
- Handling and other fees: customs brokerage, port and terminal charges, warehousing, and compliance costs.
Duty is charged as a percentage of the customs value, usually the transaction price, so it scales with quantity and with any price rise. That is what makes it such a large and visible line in fashion, where the percentage itself is high.
How to calculate landed cost
Formula: landed cost = product cost + freight + duties and taxes + insurance + handling. Worked example: a jacket with a $30 factory price, $3 of freight and insurance, and a 15% apparel duty on the $30 (that is $4.50), lands at about $37.50, before inland handling.
That is a 25% jump the factory price never showed. Calculate it per unit, so you can compare suppliers and price each style on what it truly costs, not on the number the supplier led with.
Why landed cost matters most in fashion
Every importer needs landed cost, but fashion is the category where ignoring it hurts most, because apparel carries some of the highest import duties of any product.
The average US tariff on apparel and footwear runs over five times higher than the average on all other imports, and the applied rate on apparel has sat around 14 to 15% in recent years, higher still for man-made fibers. Duties then rose sharply under 2025 US tariff policy, so any importer should check the current rate for their exact product and country. Almost all clothing sold in the US is imported, which is covered in our guide to the fashion supply chain.
Because duty is charged as a percentage of value, it scales with every unit, and it can turn a seemingly cheap overseas buy into an expensive one. In fashion, landed cost is not an accounting detail; it is a first-order sourcing and pricing input.
Landed cost vs product cost vs COGS
Three cost terms get mixed up, and the difference matters for both buying and accounting.
- Product cost: just the factory or FOB price, the smallest of the three and the one suppliers quote.
- Landed cost: the full cost to get that product to your warehouse, ready to sell; the right basis for pricing and comparing suppliers.
- Cost of goods sold (COGS): an accounting figure recognized when the item sells, built up from the landed cost. It feeds the margin and turnover math in retail math.
How landed cost shapes sourcing decisions
Landed cost is where a sourcing decision is actually won or lost. A lower factory price in a far-off country can be wiped out by freight and duty, while a nearer or duty-advantaged supplier can land cheaper despite a higher quote. This is the real math behind the domestic-versus-overseas choice in how to find a clothing manufacturer.
A quick comparison shows why. Supplier A overseas quotes $28 a unit, then adds $4 freight and a 15% duty, landing near $36.20. Supplier B, nearer and duty-free under a trade agreement, quotes $33 with $1.50 freight and no duty, landing at $34.50. The higher quote is the cheaper buy, and only landed cost reveals it.
It also rewards knowing the trade rules. Free-trade agreements and duty programs, the fiber and tariff classification of a garment, and where it is cut and sewn can all move the duty rate, which is why textile sourcing and landed cost have to be planned together, not in sequence.
Landed cost and Incoterms
A supplier quote is only comparable once you know its Incoterm, the trade term that says where the seller's cost stops and yours begins.
- EXW or FOB: the seller's price covers little of the journey, so most of the freight, duty, and handling falls on you and must be added to reach landed cost.
- CIF: the seller covers cost, insurance, and freight to the destination port, but duty and inland handling are still yours.
- DDP: the seller delivers duty-paid, so their quote sits much closer to your landed cost, usually at a premium for the convenience.
Comparing an EXW quote against a DDP quote on price alone is meaningless. Convert every quote to a full landed cost first, or you are comparing different amounts of the journey.
How to reduce landed cost
- Source under a trade agreement: buying from a free-trade-agreement or duty-preference country can cut or remove the duty, often the single biggest lever.
- Get the classification right: the garment's tariff code and fiber content set the duty rate, so accurate classification, and fiber choices, can lower it legitimately.
- Consolidate and optimize freight: fuller containers, the right mode, and better Incoterms reduce the per-unit shipping cost.
- Consider nearshoring: a closer supplier can beat a cheaper distant one once freight, duty, and speed are all counted.
- Model it before you commit: run the full landed cost, not the quote, on every candidate supplier before the order goes in, so the surprise does not arrive with the container.
From landed cost to the right buy
Landed cost tells you what a product will truly cost to bring in. It cannot tell you whether it will sell, and a perfectly costed buy of the wrong product is still a loss in the making.
That is the demand question underneath every sourcing decision. Apshan builds the signal layer above the plan, a connected, sourced read on fashion demand, so the products you cost and source are the ones the market will actually want. See how it feeds textile sourcing, or request access and see the plans and pricing.