Landed Cost Definition

The cost of goods increases on the basis of shipments, customs charges, and the price of the goods. In simple words, a consumer is required to pay the transportation fee along with the product price upon purchasing the goods. (SFSP) Therefore, one can get the landed cost definition by understanding the procedure.

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Definition of Landed Cost

The combination of the shipping cost, custom duties, and retailing price of the product is known as the landed cost. Hence, the landed cost definition can be understood by measuring the shipping, custom, and product value.

For example, Shipping charges = INR 500

Product value = 1200

Custom = 200

Landed cost = 500+1200

= INR 1700

Calculation of Landed Cost

The landed cost of goods can be calculated by simply applying the formula listed below.

The basic equation that one is required to calculate is:

Landed cost = Customs + Overhead + Risk + Shipping

Let us understand the equations for the calculation mentioned above.

Shipping

The Shipping cost is associated with various aspects such as packing, freight, crating, and handling. Therefore, after calculating all these aspects, one can measure the shipping cost of the goods.

Customs

Every nation has a designated authority to monitor the goods coming inside and moving outside the border. A custom authority will not allow certain goods if it is outlawed in that country. The authorities are responsible for imposing customs duties, tariffs, and taxes in order to let the goods be transported inside the country.

Risk

The addition of the risk factor is equally essential for the calculation of landed cost, or the company may incur a loss.

Overhead

Costs such as travel, exchange rates, and purchasing staff are included under overhead.

Hence, one can measure the landing cost after calculating the abovementioned equation.

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Case Study

Let us understand the case study to better comprehend the calculation and definition of landed cost.

Mr. X is a businessman owning a factory in South Africa that sells RG shoes worldwide. Sri Lanka is an excellent business partner of Mr. X, which offers him the ease of doing business in their country. Sri Lanka has also provided him marine insurance policy in order to cover the losses.

Mr. X, at the end of every month, sends the shoes made by his company to further sell to the people of Sri Lanka. The Board of Directors of RG shoes have decided the value of 1000 shoes as USD 2000. Further, the shipping charges incurred by Mr. X are USD 130. The risk has been calculated as USD 100. Additionally, the overhead charges incurred by Mr. X are USD 50.

Hence, Mr. X needs to add all the charges in order to find the landed cost.

Landed Cost = 2000+ 130+ 100 + 50

= USD 2400

Conclusion

Understanding the landed cost definition is crucial to determine the value of a product. Further, it is equally vital for a company to purchase a marine insurance policy to prevent losses. A marine insurance policy is crucial for the ease of doing business. Hence, every business person should buy a marine insurance policy.

Written By: PolicyBazaar - Updated: 28 April 2023

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Policybazaar for Business - Marine Insurance - Customer Reviews
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4.3/5
Based on 114 reviews
4.3
out of 5
Based on 114 reviews
14 users
87 users
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3.8 April 20, 2023
Anas
Great Experience
I recently purchased Marine insurance from Policybazaar for my shipping business and I must say I am thoroughly impressed with their service and coverage. From start to finish, the experience has been smooth and hassle-free.Thankyou.
Mizoram
4.3 April 03, 2023
Vaishnav
Provides Comprehensive Protection
When it comes to coverage, Marine insurance that i bought from PolicyBazaar has exceeded my expectations. It provides comprehensive protection for my cargo and vessels during transit, ensuring I can focus on my business operations with peace of mind. Thankyou.
Assam
4.3 March 17, 2023
Umang
Excellent Services
I highly recommend Marine insurance from PolicyBazaar website to anyone in the shipping or logistics industry. Their user-friendly website, comprehensive coverage, and excellent customer service make them stand out from the competition. With Policybazaar, I feel confident in navigating the high seas, knowing that my business is well-protected. Thank you, Policybazaar.
Chennai
4.3 February 28, 2023
Vishal
User Friendly Interface
The website's user-friendly interface made it easy to compare different plans and find the perfect fit for my business needs.Thanks
Gurugram
4.3 February 11, 2023
Parth
Prompt Services
I appreciate the transparency and honesty with which Policybazaar handled my claims. They were prompt in processing my claim and their claim settlement process was hassle-free.Thanks PolicyBazaar.
Noida
3.8 February 10, 2023
Rishabh
Exceeds Expectations
I recently had the pleasure of purchsing marine insurance from Policy bazaar website and I must say it has been an outstnding experience from start to finish. I am thrilled to share my positive customer review, as this truly exceeded my expectations. Thanks PB.
Jamshedpur
3.8 January 31, 2023
Arvind
Easy Navigation
The ease of navigating the Policy bazaar website and finding the right marine insurance policy was impressive. The website's user-friendly interface and intuitive design made it incredibly simple to compare various options, understand the coverage details and make an informed decision. I appreciated the transparency provided throughout the process. Thanks.
Ajmer
3.8 January 21, 2023
Vishal
Excellent Support
The customer service provided by Policy bazaar was decent. Their team was responsive, knowledgeable and went above and beyond to assist me at every step. Their professionalism and commitment to customer satisfaction were truly commendable.Thankyou.
Mumbai
4.3 January 11, 2023
Sanjeev Rathor
Efficient Process
When it came to claims processing, Policy bazaar demonstrated remarkable eficiency and effectivenes. I had an unfortunate incident during the coverage period and filing a claim was a breeze. The entire process was streamlined and their team guided me throuugh every necssary step, making it hassle-free. The promptness with which my claim was setled reflected their commitment to their customers' well-being and peace of mind. Thankyou.
Pune
3.8 January 01, 2023
Kunal
Comprehensive Coverage
I must mention the comprehensive coverage provided by the marine insurance policy I purchasd through Policy bazaar. It offered me the necesary protection and peace of mind. Thankyou PolicyBazaar.
Indore