Landed Cost Calculation for Imported Cosmetics: Step by Step

In short: landed cost = goods value + international freight + insurance + import duty + import VAT or GST (where it is a real cost to you) + clearance and local delivery, divided by the number of units. The two places people go wrong are the customs value, because countries differ on whether freight and insurance are included, and the tax base for import VAT, which usually includes the duty.

This guide gives the formula, the rules that decide each line, and a blank worksheet. It contains no prices, freight rates or duty rates: those depend on your products, route and destination, and you should take them from your own quotes and the destination’s tariff.

Step 1: Start from the goods value and your Incoterms® rule

Write down the unit price and quantity from the pro forma invoice, and note the Incoterms® rule. The Incoterms® rule tells you which costs are already inside the supplier’s price.

Under EXW you pay for everything from the supplier’s door; under FOB the supplier’s price covers delivery onto the vessel at the port of export; under CIF the supplier also pays sea freight and minimum insurance to the destination port, where the ICC notes that Institute Cargo Clauses (C) remain the default cover (ICC, Incoterms® 2020).

Under DDP, delivery duty paid, the seller takes on import clearance and duties.

Anything the Incoterms® rule leaves to you goes into the next steps. Do not count a cost twice.

Step 2: Add international freight and insurance

Add the freight and cargo insurance you pay yourself. Allocate them across products in a way that fits the shipment: by gross weight for heavy liquids, by volume for bulky packs, or by value when the mix is even. Cosmetics are often light but bulky, so a value-only split can understate freight on large items such as body care.

For how cargo insurance clauses differ, see cargo insurance for cosmetics.

Step 3: Work out the customs value the destination will use

Duty is charged on the customs value, and the definition differs by country:

• European Union. The primary basis is the transaction value (Union Customs Code, Article 70(1)), and Article 71(1)(e) adds the cost of transport and insurance up to the place where the goods are brought into the EU (Regulation (EU) No 952/2013, Title II Chapter 3¹). In effect, a CIF-type value at the EU border.
• United States. CBP explains that the price actually paid or payable excludes international freight, insurance and other C.I.F. charges (CBP, Customs Value (PDF)²). In effect, closer to a FOB value.
• Hong Kong. Customs collects duty on only four types of dutiable commodities: liquors, tobacco, certain hydrocarbon oil and methyl alcohol (Customs and Excise Department³). Cosmetics are not among them, so the duty line is zero, but an import declaration is still required (Step 6).

Step 4: Find the duty rate and calculate duty

Duty = customs value × duty rate. The rate depends on the HS code, the destination’s tariff and, where you can claim it, a free trade agreement rate with a valid proof of origin. Most skincare and make-up falls under heading 3304, but check the full code for each product; see HS codes for cosmetics.

If a product could fall under two codes, ask the destination’s customs for a ruling rather than guessing. A wrong code changes the duty line and every line after it.

Step 5: Calculate import VAT or GST on the right base

Import VAT is usually charged on more than the goods value. The UK, for example, says the VAT value of imported goods is their customs value plus incidental expenses such as commission, packing, transport and insurance, plus any customs duty or levy, plus excise or other import charges, but not the VAT itself (GOV.UK, VAT on imports⁴).

Import VAT = (customs value + duty + other charges in the base) × VAT rate.

Whether this line belongs in your landed cost depends on whether you can recover it. A VAT-registered business that reclaims import VAT should track it as cash flow rather than cost; a business that cannot reclaim it should include it.

Step 6: Add clearance fees and local delivery

The last group covers what it takes to get the goods from the arrival port to your warehouse: customs broker fees, terminal and handling charges, any inspection costs, and the truck to your door.

In Hong Kong, traders must lodge import and export declarations within 14 days after importation or exportation, and a declaration charge applies.

For non-food goods it is HKD 0.2 for the first HKD 46,000 of value plus HKD 0.125 for each additional HKD 1,000 or part of it, rounded up to the nearest 10 cents, with each declaration capped at HKD 200 since 1 August 2018 (Customs and Excise Department⁵).

Step 7: Divide by units to get landed cost per unit

Add every line and divide by the number of sellable units. Use one row per product so that freight and duty land on the right item. A blank worksheet:

Swipe sideways to see the whole table.

Note that D is a calculation base, not an extra cost, which is why it is not added in line I.

Related reading and pages

Destination rules shape several of these lines; see our guides to EAEU declaration and state registration and to CDSCO import registration in India.

SEONGWOO GLOBAL is a Korean cosmetics wholesale exporter with companies in Seoul and Hong Kong. When you ask us for a quote, tell us the Incoterms® rule and destination you need, so the price you receive slots straight into line A.

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