Short answer: Landed cost is the total cost of getting a product to your warehouse in the UAE: product price + international freight + insurance + customs duty (usually 5% of CIF value) + import VAT (5% of CIF plus duty) + customs broker and port fees + inspection + local delivery. Divide the total by the number of units to get your true cost per unit.
The landed cost formula
Landed cost per unit = (product + freight + insurance + duty + VAT + fees + inspection + delivery) ÷ number of units
Where CIF value = product + freight + insurance; duty = 5% × CIF (for most goods); VAT = 5% × (CIF + duty).
Worked example: 1,000 units from China
Assumptions for illustration: 1,000 units at USD 4.00 FOB, converted at AED 3.6725 per USD; sea freight and insurance are example figures.
| Cost item | How it’s calculated | AED |
|---|---|---|
| Product (FOB) | 1,000 × USD 4.00 × 3.6725 | 14,690.00 |
| Sea freight to Jebel Ali | Example quote | 1,800.00 |
| Insurance | Example | 50.00 |
| CIF value | Product + freight + insurance | 16,540.00 |
| Customs duty | 5% × 16,540 | 827.00 |
| Import VAT | 5% × (16,540 + 827) | 868.35 |
| Customs broker and port fees | Example | 600.00 |
| Pre-shipment inspection | Example | 1,100.00 |
| Local delivery | Example | 300.00 |
| Total landed cost | 20,235.35 | |
| Per unit | ÷ 1,000 | 20.24 |
| Per unit excluding recoverable VAT | (20,235.35 − 868.35) ÷ 1,000 | 19.37 |
The factory price was AED 14.69 per unit, but the landed cost is about AED 19.37–20.24 – roughly 32–38% higher. Pricing your products from the factory price alone would wipe out most of your margin.
How Incoterms change your calculation
| Incoterm | Supplier pays up to | You add |
|---|---|---|
| EXW (Ex Works) | Goods ready at the factory | Export clearance, local China transport, freight, insurance, UAE costs |
| FOB (Free on Board) | Goods loaded on the ship in China | Freight, insurance, UAE costs |
| CIF (Cost, Insurance, Freight) | Freight and insurance to the UAE port | UAE port, clearance, duty, VAT, delivery |
| DDP (Delivered Duty Paid) | Everything to your door, including duty | Check what is really included |
Always compare quotes on the same Incoterm, or convert them to a landed cost per unit first.
How to lower landed cost
- Order larger quantities to spread fixed costs (inspection, clearance, delivery) across more units.
- Consolidate goods from several suppliers into one shipment.
- Reduce packaging size and weight to cut freight.
- Use sea freight when you can plan ahead.
- Check if a certificate of origin or trade agreement lowers duty.
Frequently asked questions
What is included in landed cost? Landed cost includes the product price, international freight, insurance, customs duty, import VAT (if you can’t recover it), customs broker and port fees, inspection, and delivery to your warehouse. Some businesses also add storage and payment fees.
Should VAT be included in landed cost? If your business is VAT-registered and can recover import VAT, exclude it from your product cost but include it in your cash-flow plan. If you can’t recover it, include it in landed cost.
How does SourcingBytes quote landed cost? Our quotations can show the product price and the delivered cost to your UAE address, including freight, duty, VAT estimate, inspection and delivery, so you can compare suppliers on the real cost per unit.
Figures in the example are illustrative; actual freight, fees and duty depend on your product and shipment. Related: Customs duty & VAT guide · Warehousing & Logistics · Request a delivered-price quote.
