How to compute landed cost (the formula that matters)
Most importers price their products off the supplier invoice. That's how you end up busy, growing, and quietly making nothing.
Why unit price lies to you
Your supplier quotes ₱120 a unit. You plan to sell at ₱250. Feels like a healthy margin.
Then freight, duty, VAT and handling arrive, and your real cost is ₱190. Your margin was never what you thought, and you have been discounting against a number that did not exist.
Landed cost is what a unit actually costs you sitting in your warehouse, ready to sell. It is the only number worth pricing against.
The formula
Philippine customs value your goods on CIF — Cost, Insurance and Freight.
| Step | Calculation |
|---|---|
| 1. Dutiable value (CIF) | Goods + freight + insurance |
| 2. Customs duty | CIF × duty rate for your HS code |
| 3. VAT | (CIF + duty) × 12% |
| 4. Other charges | Brokerage, processing, stamps, handling, delivery |
| Landed cost | Sum of all four |
The detail that catches everyone: VAT is charged on CIF plus duty, not on the goods value. You pay VAT on the duty. It compounds, and it is why people's estimates come in low.
A full worked example
You are importing 500 units of a homeware item from China.
- Supplier price: ₱120 per unit → ₱60,000
- Sea freight and insurance: ₱15,000
- Duty rate for this HS code: 10%
| Line | Amount |
|---|---|
| Goods (FOB) | ₱60,000 |
| Freight + insurance | ₱15,000 |
| CIF / dutiable value | ₱75,000 |
| Customs duty @ 10% | ₱7,500 |
| VAT @ 12% of (75,000 + 7,500) | ₱9,900 |
| Brokerage, processing, stamps, handling (est.) | ₱4,000 |
| Total landed cost | ₱96,400 |
| Landed cost per unit | ₱192.80 |
Your ₱120 unit costs ₱192.80. That is 61% above the supplier price.
If you had priced at ₱250 assuming a ₱120 cost, you thought your margin was 52%. It is actually 23% — before storage, marketing, platform fees, returns or your own time.
The same order with an all-in rate
The example above prices freight, duty, VAT and fees as separate lines, because that is how most forwarders bill. With an all-in rate, those lines are already inside one number. Here is the same 500 units, assuming the cartons measure 2 CBM and weigh 400 kg, shipped by sea as Commodity 1 (household, apparel, daily goods):
| Line | Amount |
|---|---|
| Goods (FOB) | ₱60,000 |
| Sea freight, all-in: 2 CBM × ₱9,250 | ₱18,500 |
| Duty, VAT, port fees, warehouse fees | Included |
| Total landed cost | ₱78,500 |
| Landed cost per unit | ₱157 |
This is not a like-for-like comparison with the first example: the volume and weight are assumptions, and your goods may fall in a different commodity class. The point is the method. With an all-in rate, landed cost is goods plus one freight number, and the rate is confirmed once your cargo is measured at our warehouse.
If the cartons are dense. Every CBM comes with a 500 kg weight allowance. Say the same 2 CBM weighed 1,200 kg: that is over the 1,000 kg allowance, so it bills on weight instead, 1,200 × ₱21 = ₱25,200, which is more than the ₱18,500 volume rate. Landed cost becomes ₱85,200, or ₱170.40 per unit.
Run your own numbers in the shipping cost calculator. It applies our published rate matrix, including the weight rule.
What people leave out
- VAT compounding on duty. Covered above. The most common error.
- Chargeable weight. Sea freight is billed on volume, or on total weight if the shipment exceeds 500 kg per CBM — whichever is greater. Dense goods get billed on weight and blow past a volume-only estimate.
- Defect and loss rate. If 3% arrives unsellable, your effective cost per sellable unit is higher. Count it.
- The cost of money. Paying a supplier deposit in month one and selling in month three is capital tied up. That has a cost even if it never appears on an invoice.
- Last-mile delivery. Getting goods from the Manila warehouse to you.
Where the ₱10,000 threshold fits
Shipments with a dutiable value at or below ₱10,000 are exempt from duty and VAT. Above that, the full calculation applies.
Be careful: the Bureau of Customs aggregates multiple shipments to the same consignee on the same day, so splitting an order into small parcels does not keep you under the line. The full explanation is here.
Making this easier
Two things remove most of the guesswork.
Get your HS code right. The duty rate depends entirely on classification, and rates range from 0% to well above 30%. Guessing means your whole calculation is guesswork.
Get an all-in quote. When we quote all-in, duty, VAT, port fees both ends, freight and warehouse handling are already inside the number. Your landed cost becomes goods plus our quote, and there is no customs bill waiting at release. You can estimate it yourself in the shipping cost calculator.
Build the calculation once in a spreadsheet with your real duty rate and reuse it for every order. Ten minutes now, and you never price blind again.
Related reading
- Philippine import duties and taxes: what you actually pay
- Form E: the document that cuts your China duty to zero
- Form D: the ASEAN document that takes your duty to zero
- What shipping from China actually costs
- What is CBM? How sea freight is actually priced
- Shipping cost calculator: China, Korea, Taiwan and Hong Kong
- Magkano ang puhunan para mag-import? (Taglish)
- The ₱10,000 de minimis rule in 2026
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