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Guide April 16, 2026 · Guidance Team

• ✓ Always get quotes for all cost components: raw material, freight, duties, handling.
• ✓ Understand Incoterms (FOB, EXW) to clarify cost and risk responsibilities.
• ✓ Use HTS codes to determine accurate duty rates and avoid surprises.
• ✓ Track all landed costs digitally for real-time COGS accuracy and pricing.

Start with the Raw Material Invoice Cost (FOB or EXW)

Your initial cost is the price your supplier charges for the raw material itself. This is often quoted as Free On Board (FOB) or Ex Works (EXW). With EXW, you are responsible for all costs and risks from the supplier's factory gate. FOB means the supplier covers costs until the goods are loaded onto the vessel at the port of origin. For example, if your supplier quotes you $2.50/kg for organic freeze-dried raspberries FOB Shanghai, that $2.50/kg is your starting point. Make sure to understand the Incoterms specified on your purchase order, as they dictate precisely where your responsibility for costs and risk begins. This base cost is just the foundation; many other expenses will build upon it to reveal your true ingredient cost.

Factor In International Freight Charges

Once your ingredients are ready for shipment, you'll incur international freight costs. This covers the movement from the origin port to the destination port. Depending on the volume, you'll either ship Less than Container Load (LCL) or Full Container Load (FCL). LCL means your goods share a container with other shipments, often incurring higher per-unit costs due to consolidation fees. FCL dedicates an entire container to your goods. These charges include the ocean or air freight itself, plus various surcharges like Bunker Adjustment Factor (BAF) for fuel, and currency adjustment factors. A pallet of ingredients from Europe could easily add $300-$500 in ocean freight alone, impacting your per-kilo cost significantly.

Don't Forget Customs Duties and Tariffs

Customs duties and tariffs are taxes levied by your country's government on imported goods. These rates vary widely based on the specific ingredient and its country of origin, determined by its Harmonized Tariff Schedule (HTS) code. You are responsible for ensuring your ingredients are correctly classified. If you're importing organic fruit puree, for instance, it will have a different HTS code and duty rate than organic quinoa. A professional customs broker can help you classify your goods to avoid penalties or overpayments. A 5% duty on a $10,000 shipment adds $500 to your cost immediately, and these costs are non-negotiable for import.

Account for Brokerage and Port Handling Fees

Even after duties, there are several fees associated with getting your shipment through customs and out of the port. Your customs broker charges a fee for their services, which include preparing documentation, filing entries, and coordinating with customs authorities. Beyond brokerage, ports levy various charges. These can include Terminal Handling Charges (THC) for moving the container within the port, chassis fees for the trailer used to move the container, and potential demurrage (for delays at the port) or detention (for delays returning the empty container). Expect $200-$400 for brokerage per shipment, plus variable port fees that can quickly add up if not managed efficiently.

Calculate Domestic Freight to Your Co-Packer or Warehouse

The journey isn't over once your ingredients clear customs and leave the port. You still need to transport them from the port to your co-packer or brand warehouse. This is your domestic freight cost. Depending on the distance and volume, this could be Less-than-Truckload (LTL) or Full Truckload (FTL). LTL is for smaller shipments that share trailer space, while FTL dedicates an entire truck. Fuel surcharges, accessorials (like liftgate service or appointment fees), and transit time all impact this cost. Moving a pallet from the port of Los Angeles to a Midwest co-packer, for example, might cost another $250-$500. This final leg is often overlooked but is a critical component of your true landed cost.

Assemble All Costs for True Landed Cost

Now, sum up every single cost: the raw material invoice, international freight, customs duties, brokerage fees, port charges, and domestic freight. Divide this total by the quantity of ingredients to get your true landed cost per unit. This figure is your actual COGS for that ingredient, not just the supplier's price. This is where a tool like Guidance becomes critical. Instead of manual spreadsheets, Guidance's Purchase Orders module lets you input all these line items – freight, duties, broker fees – directly, automatically calculating your actual landed cost per unit. This real-time COGS update means your Bill of Materials always reflects the most accurate ingredient cost, not just the supplier invoice. Accurate landed cost is fundamental to profitable pricing.

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