The landed cost is the total cost to get an imported product into your US warehouse, fully cleared through customs. It is the number you need for accurate pricing, margin analysis, and sourcing decisions — but it's routinely underestimated by importers who only budget for product cost plus a rough duty estimate.
The real import cost breakdown includes six components that often surprise first-time importers:
Importers sourcing from China often budget product cost + 25% Section 301 duty and call it landed cost. The actual landed cost on a $25,000 China shipment with ocean freight, insurance, MPF, HMF, and broker fees can easily run 35–45% above the FOB product price. Underestimating landed cost is how margin surprises happen.
Landed cost is the sum of all costs incurred to move goods from the supplier's factory to your domestic warehouse, customs-cleared:
Customs duties are assessed against the customs value, which is the dutiable value of the goods as determined by CBP under 19 USC §1401a. The preferred method is Transaction Value — the price actually paid or payable for the goods, adjusted for certain additions and deductions.
The US uses FOB (Free on Board) value as the basis for duty calculation — meaning duties are assessed on the product price at the foreign port of export, not including international freight and insurance. This contrasts with the EU, which uses CIF value. If your invoices are on CIF terms, you must deduct freight and insurance to arrive at the FOB customs value for US entry purposes.
These two CBP-collected fees are non-duty charges that apply to virtually every commercial import. They are frequently overlooked in landed cost models — especially on high-value shipments where the MPF cap becomes significant.
| Fee | Rate | Minimum | Maximum | Applies to |
|---|---|---|---|---|
| Merchandise Processing Fee (MPF) | 0.3464% of customs value | $31.67 | $614.35 | Most formal entries |
| Harbor Maintenance Fee (HMF) | 0.125% of cargo value | None | None (no cap) | Ocean cargo only |
The MPF is collected by CBP to offset the cost of processing commercial import entries. At 0.3464% with a minimum of $31.67 and maximum of $614.35 per entry, the fee is capped for large shipments. For a $200,000 shipment, the uncapped MPF would be $692.80 — but the cap limits it to $614.35.
Key MPF rules:
The HMF was established by the Water Resources Act of 1986 to fund construction and maintenance of US harbors and inland waterways. At 0.125% of cargo value with no cap, the HMF scales linearly with shipment value.
Customs duty on a China-origin shipment in 2026 is typically the sum of three separate duty components, each with its own legal basis and rate:
The total duty rate is the sum of all applicable rates. On a typical Chinese manufactured good with a 5% MFN rate, 25% Section 301, and 15% Section 122, the combined rate is 45% — applied to the customs value.
AD/CVD orders are separate from ordinary tariffs and can add 50–300%+ to the duty burden on affected products. AD/CVD orders are maintained by the International Trade Administration (ITA) at commerce.gov, and the rates are reviewed periodically in annual administrative reviews. CBP maintains a public database of active instructions at aceservices.cbp.dhs.gov/adcvdweb. Always check for AD/CVD coverage before finalizing a landed cost model.
Here is a fully worked landed cost calculation for a $25,000 (FOB) shipment of industrial machinery components from China, arriving by ocean freight in 2026. The base MFN rate on this HTS code is 3.5%; Section 301 List 1 applies (25%); the Section 122 global tariff applies (15%). No AD/CVD order covers this product.
| Cost Component | Calculation | Amount |
|---|---|---|
| Product Cost (FOB) | Invoice value | $25,000.00 |
| International Ocean Freight | FCL 20' container, China→LA | $2,200.00 |
| Cargo Insurance | 1% of cargo value ($25,000) | $250.00 |
| Customs Value (FOB basis) | Product cost (freight excluded on FOB terms) | $25,000.00 |
| Base MFN Duty | 3.5% × $25,000 | $875.00 |
| Section 301 (List 1) Duty | 25% × $25,000 | $6,250.00 |
| Section 122 Global Tariff | 15% × $25,000 | $3,750.00 |
| Total Customs Duty | 43.5% effective rate on customs value | $10,875.00 |
| Merchandise Processing Fee (MPF) | 0.3464% × $25,000 = $86.60 (above min) | $86.60 |
| Harbor Maintenance Fee (HMF) | 0.125% × $27,450 (CIF value) | $34.31 |
| Customs Broker Fee | Standard ISF + entry filing | $275.00 |
| Domestic Drayage (Port to Warehouse) | Inland freight, LA to distribution center | $650.00 |
| TOTAL LANDED COST | All components above | $40,370.91 |
The effective landed cost rate is 61.5% above FOB product cost for this China-origin shipment. The customs duty alone represents 43.5% of the product value. This is why accurate landed cost modeling — not back-of-envelope estimates — is essential for pricing and sourcing decisions.
The United States has free trade agreements (FTAs) with 20 countries. Products qualifying for FTA treatment typically pay 0% MFN duty, and — critically — qualify for MPF exemption. The combined savings can be substantial.
FTA duty rates are not automatic. To claim preferential treatment, the importer must:
Many importers have shifted assembly from China to Vietnam, Thailand, or Mexico to avoid Section 301 tariffs. CBP aggressively enforces country of origin rules under Section 301 enforcement. Minimal operations (simple assembly, repackaging, or labeling) in a third country do not confer that country's origin. The product must undergo a substantial transformation — typically defined as a change in HTS classification or a specified regional value content threshold. Verify origin with a trade attorney before switching sourcing to claim non-China origin.
The lowest-cost supplier is not always the lowest landed cost supplier. A Chinese manufacturer at $20/unit with 43.5% duty burden may be more expensive than a Mexican supplier at $24/unit with 0% duty and MPF exemption.
To build a proper sourcing comparison, calculate landed cost for each candidate origin country using:
The landed cost formula is the starting point — but the full sourcing decision should incorporate lead time, minimum order quantities, supplier quality, and supply chain resilience alongside the pure cost calculation.
Enter your product details and get a full itemized breakdown — duty, MPF, HMF, trade agreement savings, and scenario comparisons across sourcing origins.