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Landed cost: what an imported unit really costs by the time it can sell

FOB is the start of the number, not the number. Freight, insurance, customs duty, social welfare surcharge, IGST and clearing — and which of them you can claim back.

8 min read

The single most common importing mistake is treating the supplier's FOB quote as the cost of the product. By the time a unit is sellable in India it has usually gained 30–60% on top, and the components behave very differently on your P&L.

Building the number in order

  1. FOB value — the supplier's price at the port of origin, converted at the rate you will actually get, not today's mid-market rate.
  2. Freight — sea or air, and the difference is not only money: air shortens the cash-conversion cycle, which for a fast-moving SKU can be worth more than the freight saving.
  3. Insurance — a small percentage of FOB, and the customs assessable value assumes it whether you bought it or not.
  4. Assessable value (CIF) = FOB + freight + insurance. Every duty below is calculated on this, not on FOB.
  5. Basic customs duty (BCD) — rate set by the HS code. Getting the classification wrong is expensive in both directions.
  6. Social welfare surcharge — charged on the BCD, not on the goods.
  7. IGST — charged on (assessable value + BCD + surcharge).
  8. Clearing, CHA and inland freight — fixed per shipment, so they fall per unit as volume rises. This is why the same SKU has a different landed cost in a 500-unit and a 5,000-unit order.

The distinction that changes the decision

IGST is creditable if you are GST-registered. Customs duty is not. So your true cost base for pricing is the landed cost excluding IGST — but your working capital requirement includes it, because you pay it at the port and recover it later.

Sellers who model IGST as a cost under-price nothing and simply believe their margins are worse than they are. Sellers who ignore it entirely run out of cash at the port. Both errors come from one line item.

Then the marketplace takes its share

Landed cost is where the product story ends and the channel story starts. The same unit still has to absorb referral fees, fulfilment, returns and advertising before anything reaches you. Model both halves or you have modelled neither — the Landed Cost Calculator handles the import side and Profitability AI the channel side.

Supplier vetting, negotiation, QC gates, HS classification and the full compliance path are in the China Import to India Playbook.