A factory quotation is not the same thing as the final cost of importing a product.
One of the most common mistakes new importers make is comparing suppliers based solely on their unit price. A product quoted at $5 from one supplier isn’t necessarily cheaper than a product quoted at $5.50 from another supplier.
The difference becomes clear when you calculate the landed cost.
What Is Landed Cost?
Landed cost is the estimated total cost of getting a product from the supplier to its final destination.
Depending on the order, it can include:
- Product cost
- Packaging
- Tooling
- Sample costs
- Freight
- Insurance
- Customs duties
- Tariffs
- Brokerage
- Port or handling charges
- Other import-related costs
The exact components depend on the product, shipping method, destination, and commercial terms.
Why Factory Price Can Be Misleading
Imagine two suppliers quote:
Supplier A: $10 per unit
Supplier B: $10.50 per unit
At first glance, Supplier A appears cheaper.
But suppose Supplier A has a higher MOQ, longer lead time, more expensive packaging, and higher shipping costs.
Supplier B may actually provide a lower total landed cost.
That’s why comparing only unit prices can lead to the wrong purchasing decision.
A Simple Example
Imagine you’re importing 2,000 units.
The supplier charges:
2,000 × $10 = $20,000
You then have additional costs:
- Freight: $2,000
- Insurance and handling: $300
- Duties/tariffs: $2,000
- Brokerage and other charges: $500
Your estimated landed cost becomes:
$24,800
Your effective landed cost per unit is:
$24,800 ÷ 2,000 = $12.40
The factory price was $10, but your actual estimated cost is $12.40 per unit.
Tariffs Matter
Tariffs and duties depend on the product classification, country of origin, destination, and current trade measures.
There isn’t one universal tariff percentage for all Chinese products.
The correct classification of your product can therefore have a significant effect on the final import cost.
For important shipments, tariff estimates should be confirmed with a qualified customs professional or customs broker.
Freight Can Change the Calculation
Shipping costs depend on:
- Shipment volume
- Shipment weight
- Shipping method
- Origin
- Destination
- Season
- Carrier
- Fuel costs
- Port conditions
For smaller shipments, air freight may make sense because of speed.
For larger shipments, ocean freight can often be more economical, although transit times are longer.
Incoterms Also Matter
When comparing supplier quotations, pay attention to the Incoterm.
A quotation under one term may include transportation to a certain point, while another quotation may leave those costs to the buyer.
Always understand exactly what the supplier’s price includes before comparing it with another supplier’s quotation.
Don’t Forget Packaging
Packaging isn’t always a minor cost.
Custom boxes, inserts, labels, printed materials, protective packaging, pallets, and other requirements can increase the total cost of an order.
If you’re developing a branded product, ask suppliers to quote packaging separately so you can understand the impact.
Calculate Before You Order
Before approving production, build a simple cost model:
Product Cost
- Packaging
- Freight
- Insurance/Handling
- Duties/Tariffs
- Brokerage
- Other Import Costs
= Estimated Landed Cost
This gives you a much clearer picture of what you’re actually paying.
Final Thoughts
The cheapest factory quotation isn’t always the cheapest sourcing option.
Understanding landed cost helps you compare suppliers fairly, set realistic margins, and avoid unpleasant surprises after your goods leave the factory.
Before placing your next order, look beyond the factory price. Calculate the cost of getting the product all the way to you.