Determining landed cost is an important part of how trading for commodities work. Essentially, landed cost equals the total expenses paid by the importer when the cargo arrivers. There are numerous elements that will comprise the landed cost, including the shipping fees with the freight forwarder, fees related to business risk and even staffing expenses.
Examining the different components of the landed cost is important. At the top of that list is the cost for the actual cargo. It also includes all of the transportation expenses, like the ocean freight shipping rate and insurance. On top of that, a shipper should add all of the terminal fees that are usually included, as well as appropriate duties and taxes. Any customs fees should be added to this. There might also be banking fees included.
The total landed cost is calculated through a proforma invoice. On that document, the shipper should include the freight being shipped and a list of all of the expenses. This document is given to the importer from the exporter. The total landed cost should include all of the expenses plus the exporter’s profit. This usually factored in when buying cargo in an international setting.
A typical mistake that a shipper makes is forgetting about making a landed cost analysis. Without this, it would be tough to compare the price differences of everything versus another exporter. Many shippers do not calculate the landed cost properly and they are missing out on money.