NDTO News Article

A necessary step to exporting and helping your company succeed is understanding the “landed cost” of your goods. Considering all components, ingredients, items, processes, insurance, shipping, taxes, tariffs, and fees will help determine landed costs and your final cost in a given market. Understanding these costs will make sure your product is priced appropriately to make a profit yet competitive enough for the given market. There may even be variations to your landed costs based on the destination location, but you won’t know until you work through the numbers.

So, how do we get as close as we can to understanding the landed costs? Research, careful planning, and a little bit of estimating. The more experience you gather will also help along the way and make this process easier for future products. These steps can be used for any product, domestic or international, but we will focus on some additional items to consider for exporters. Here are steps to keep in mind as you calculate the landed costs:

1. Identify Cost Components: Determine the cost components involved in creating the product. These can include:
   1. Product cost:
      1. This includes all small and large components that go into product creation. Whether it is metal and plastic parts or grains and sugar, break down each item for cost in a measurable and scalable way.
   2. Packaging and labeling costs:
      1. Any labels, bottles, bags, or containers should be included here.
      2. Also, include the cost of marking, printing, stamping, and labeling the product for the end destination. This may include special markings for international sales.
   3. Transportation costs: Costs related to shipping the product, including freight charges, insurance, and handling fees. With a plethora of items that go into transportation, a good freight forwarder can assist with many of the logistical costs that go into getting your product in the country to its end destination.
      1. Here is where understanding some of the logistics behind transportation may come in handy. Not only are you shipping likely overland from ND, but also likely by ocean freight or air.
      2. Insurance costs to cover your product should any damage occur or any payment for insurance should be considered.
   4. Customs duties and taxes: Import duties, tariffs, and taxes imposed by the importing country.
      1. While a freight forwarder can be an asset in understanding many of the nuances of what is needed for each product based on classification, you can get an idea of these costs by using some additional resources.
         1. The Global Tariff Finder Tool from the International Trade Administration may help assess some of the fees and tariffs you can expect.
            1. You will need your Schedule B and Harmonized Tariff System (HTS) numbers to provide more details on duty rates.
            2. Be aware of Value Added Taxes which are applicable in +170 countries or more.
         2. Documentation and compliance costs: Expenses for preparing export documentation, complying with regulations, and obtaining certifications.
         3. Storage and warehousing costs should be considered if you require for storing the product during the export process.
         4. Administrative and overhead costs: General administrative expenses associated with the export operations.
      2. Gather Cost Data: Collect cost data from various sources, including invoices, shipping documents, transportation providers, customs authorities, and any other relevant documentation.
      3. Convert Currencies: If you’re dealing with multiple currencies, convert all costs into a common currency to ensure consistency in calculations. Use the prevailing exchange rates at the time of the transactions.
         1. NDTO typically uses this one, but there are several tools out there.
      4. Sum the Costs: Add up all the individual cost components to obtain the total landed cost. This final figure represents the total expenses incurred to deliver the product to the buyer’s location.

Now that you have a better idea of what it will cost to get your product into an international consumer’s hands, additional research should be done to see if the landed cost you would like to charge is competitive or will be well received in the desired market. Find similar products to determine if your product and pricing model will be well-received.

Calculating landed costs accurately is crucial for determining pricing, profitability, and competitiveness in the export market. It also helps exporters make informed decisions about pricing, market selection, and potential cost-saving measures. While this can be a time-consuming process and may leave you scratching you head, know that you are not alone, the NDTO team is here to support you with any questions along the way. Please reach out info@ndto.com and we would be happy to assist.