Introduction
A supplier may quote:
$5.00 per garment
At first glance, this appears to be the cost of the product.
But if the goods are being imported internationally, the buyer may also pay for:
- International freight
- Insurance
- Import duties
- Customs clearance
- Brokerage
- Port charges
- Inland transportation
- Other applicable fees
The total cost after the goods arrive at the buyer’s destination is commonly referred to as landed cost.
The U.S. International Trade Administration describes landed cost as including the product price plus items such as insurance, freight, tariffs, taxes, and other fees.
A Simple Landed Cost Formula
A simplified model is:
Landed Cost = Product Cost + Freight + Insurance + Import Duty + Customs/Brokerage Fees + Other Applicable Costs
The exact calculation depends on:
- Country
- HS classification
- Origin
- Incoterm
- Shipping method
- Import regulations
- Tax system
Therefore, the formula should be treated as a framework rather than a universal fixed calculation.
Why FOB Price Can Be Misleading
Suppose Supplier A quotes:
$5.00 FOB
and Supplier B quotes:
$5.40 DDP
The second supplier appears more expensive when comparing only garment prices.
But these are different commercial terms.
The first quotation may leave the buyer responsible for transportation and import-related costs.
The second may include a much larger portion of the delivery process.
Therefore, buyers should compare quotations on the same commercial basis.
Freight
Transportation cost can vary depending on:
- Sea freight
- Air freight
- Express
- Shipment volume
- Carton dimensions
- Destination
- Season
- Delivery speed
A small urgent order may have a very different transportation cost per garment from a large ocean shipment.
Import Duty
Import duty is particularly important for apparel because rates can vary substantially by:
- Product category
- Fiber composition
- Garment construction
- Country of origin
- Destination market
- Applicable trade agreements
The correct HS classification should therefore be confirmed before using duty rates in a financial calculation.
Insurance
Cargo insurance may also form part of the landed-cost calculation when the buyer purchases insurance or when it is included under the relevant shipping arrangement.
The actual insurance cost depends on the cargo, route, coverage, and insurance terms.
Customs and Brokerage Fees
Import shipments may involve customs brokers and other clearance-related services.
Possible costs can include:
- Customs entry
- Brokerage
- Documentation
- Port or terminal charges
- Inspection-related costs
- Local transportation
These costs can be relatively small compared with the garment value on large shipments but can become more noticeable on small orders.
Why Small Orders Can Be Expensive
Imagine two orders:
Order A: 10,000 garments
Order B: 200 garments
Some logistics costs are related to the shipment rather than the number of garments.
If the same documentation, brokerage, handling, or transportation cost is spread across only 200 garments, the cost per garment can become much higher.
This is one reason buyers should calculate landed cost on a per-unit basis.
Comparing Two Suppliers
Instead of comparing:
Factory A: $4.80
Factory B: $5.20
buyers can create a broader comparison:
| Cost | Supplier A | Supplier B |
|---|---|---|
| Garment | $4.80 | $5.20 |
| Freight | — | — |
| Insurance | — | — |
| Duty | — | — |
| Brokerage | — | — |
| Inland delivery | — | — |
| Landed cost | — | — |
This makes the comparison more meaningful.
Incoterms Should Be Clearly Stated
A quotation should clearly state the commercial term being offered.
For example:
- EXW
- FOB
- CIF
- DAP
- DDP
These terms allocate responsibilities and costs differently.
The buyer should understand exactly what is included before comparing quotations.
What Buyers Should Ask
Before placing an international apparel order, ask:
- What Incoterm is the quotation based on?
- Which costs are included?
- Which costs are excluded?
- Who handles export clearance?
- Who arranges international freight?
- Who pays import duty?
- Who handles customs clearance?
- Is inland delivery included?
- What assumptions are being used for landed cost?
Our Approach to Custom Apparel
When preparing international custom apparel quotations, product price and logistics should be considered as separate cost components.
This allows customers to understand what the garment price includes and which transportation or import costs may remain outside the factory quotation.
For customers comparing suppliers from different countries, using the same landed-cost framework can make price comparisons more transparent.
Conclusion
The cheapest factory quotation is not necessarily the lowest total sourcing cost.
For international apparel buyers, the more useful figure is the cost of getting the finished garments to the required destination under clearly defined commercial terms.
Understanding landed cost can help buyers compare suppliers using the full financial picture rather than looking only at the factory’s unit price.
