What "cost" actually means: unit price vs landed cost
When a factory sends you a quote, that number is almost always a FOB price: the cost of the goods loaded onto the ship at a Chinese port, and nothing past it. Everything that happens after the ship leaves is your bill, not theirs. The number that matters for your business is the landed cost: what one unit costs by the time it sits in your warehouse, ready to sell. Divide that by the number of good units and you have your true per-unit cost, which is the only figure you should ever use to set a selling price. Importers who price off the FOB quote are the ones who discover their margin disappeared somewhere between Shenzhen and their loading dock.
The one-time costs people forget
Some costs hit once, at the start, and get amortized across the order. Leave them out of your first quote and your early units look cheaper than they are:
- Tooling and moulds. A custom plastic part, a die-cut box, a branded component often needs a one-time mould or tool. Budget a few thousand dollars for anything injection-moulded, sometimes more. It is a sunk cost spread over the order, so a small first run carries a heavy tooling cost per unit.
- Samples and first articles. Pre-production samples, courier charges to ship them, and the time to approve them all cost money before mass production starts.
- Inspection. A third-party AQL inspection from a firm like SGS, QIMA, or Bureau Veritas runs roughly 250 to 350 US dollars per man-day. On a first order it is one of the cheapest forms of insurance you can buy.
Getting it there: freight, insurance, and the Incoterm trap
Freight is where the FOB quote stops and your costs begin. Two routes, very different prices:
- Sea freight is cheapest per unit. A shared container (LCL) is priced by the cubic metre; a full container (FCL, 20 or 40 foot) is a flat rate that crushes the per-unit cost once you fill it. Quote freight against your real carton volume, not your guess.
- Air freight is priced per kilogram on chargeable weight and costs many times more, so it is for samples, small high-value goods, or an urgent restock.
Add marine insurance, which is cheap relative to the value it protects and worth taking on every shipment. The trap is the Incoterm (the ICC rule that sets who pays for what). A supplier quoting DDP (delivered duty paid) looks more expensive than one quoting FOB or EXW, but the DDP price already includes freight, duty, and clearance you would otherwise pay yourself. Never compare two quotes on different Incoterms. Convert both to the same point first, usually landed at your door.
The government's cut: duty, import VAT or GST, and the broker
This is the line that catches people, and it is paid to your own government, not the factory. As the importer of record, you owe:
- Import duty. A percentage set by your product's HS code and your country. Look it up in your own tariff: the US Harmonized Tariff Schedule via US CBP, the EU's TARIC database, or the UK Trade Tariff via HMRC. The rate varies enormously by product, so find your exact code before you order.
- Import VAT or GST. Most countries charge a consumption tax on the value of the goods plus freight plus duty, for example standard VAT in the EU and UK or GST in Australia. It is often refundable if you are VAT or GST registered, but you still pay it at the border and carry the cash until you reclaim it.
- Customs brokerage. A broker files the entry and is worth the fee on anything but the simplest shipment, especially while you are learning your HS codes.
Duty and import tax together are usually the biggest cost after the product itself. Model them before you commit, not when the goods are sitting at the port.
Port, last-mile, and payment fees
The smaller charges add up faster than people expect. Terminal handling and port fees at arrival, a customs exam fee if your container is pulled, demurrage and detention if the box sits too long, then last-mile trucking from port to your warehouse. On the money side, an international bank transfer (T/T) carries a wire fee, and your bank's currency spread on the USD conversion is a real cost most people never notice. None of these is large alone. Together they are several percent of the order.
A worked landed-cost example
Say you order 1,000 units at an FOB price of 8 US dollars each, using an existing product with no new tooling. The shape of the bill (rates are illustrative; use your own HS code and country):
- Goods, FOB: 1,000 × 8 = 8,000
- Inspection (1 man-day): 300
- Sea freight + insurance: roughly 700
- Import duty (say your HS code carries 6.5%, on goods + freight): about 570
- Customs brokerage + port + last-mile: about 500
- Bank wire + FX spread: about 120
That is roughly 10,190 before any refundable import VAT, against an 8,000 quote. Your true cost is about 10.19 per unit, not 8. The factory number was 78 percent of the real one, and that is a clean order with no tooling and no problems. Run this sheet before you place the order, and the price you set will actually hold.
The hidden costs nobody quotes
The numbers above are the visible bill. The ones that quietly wreck a first import are the ones no invoice lists: a defect rate you rework or write off, a delay that forces an air-freight rescue at five times the sea cost, cash tied up in a deposit and then in VAT for weeks before you sell a single unit, and the cost of your own hours chasing a factory that keeps saying "next week." A supplier with the lowest FOB quote and a 6 percent defect rate is more expensive than one quoting 5 percent higher with clean output. The right comparison is landed cost per good unit, after returns and rework, not the headline quote.
Where Mila Sourcing fits
The reason landed cost surprises people is that the pieces sit in different places: the factory, the freight forwarder, the broker, your bank. Mila puts the whole chain in one WhatsApp thread you watch and run, so the freight, the inspection, the Incoterm, and the duty exposure are visible before you wire a deposit, not after the container lands. That is the core of Sourcing Activation and Full Production Management.
Related, if you are pricing an order right now: