This landed cost calculation guide shows you how to find the true cost of one unit of imported stock. The price on the supplier invoice is only the start. Freight, insurance, duty, GST and handling fees all add to it. Add them up, divide by the number of units, and you have your landed cost.
Your landed cost is the number to use when you set a selling price. If you price from the invoice alone, your margin can vanish without warning.
What is landed cost?
Landed cost is the full cost of getting goods from the supplier to your shelf. It covers the goods and every charge paid along the way. Most small importers miss two or three of these charges the first time.
The core parts are the goods price, international freight, cargo insurance, customs duty, import GST and the fees paid at each end of the trip. Local delivery to your store or warehouse counts too.
Singapore Customs builds its own import value from similar parts. It starts with the price paid and adds freight, insurance, packing, selling commissions and other charges tied to the sale and delivery of the goods. This customs value is used to work out GST and any duty. That is why your own sums should follow the same path.
Sources: Singapore Customs, "Establishing Customs Value and Methods", https://customs.gov.sg/businesses/valuation-duties-taxes-fees/establishing-customs-value-for-imports.
Check the Incoterm on your quote
Start with the trade term on the supplier's quote. Incoterms are a set of eleven three-letter terms from the International Chamber of Commerce. The 2020 edition is the current one. Each term says what the seller pays for and what the buyer pays for.
Here are three common ones. Under EXW (Ex Works), you pay almost everything after the goods leave the seller's door. Under FOB (Free On Board), the seller pays to load the goods on the ship, and you pay the sea freight. Under CIF (Cost, Insurance and Freight), the seller has already paid freight and insurance to your port.
Read the term before you compare two quotes. A low EXW price and a higher CIF price may cost you the same in the end. Only landed cost lets you compare them fairly.
Sources: International Chamber of Commerce, "Incoterms 2020", https://iccwbo.org/business-solutions/incoterms-rules/incoterms-2020/.
Add freight, insurance and duty
Take the goods price first. Then add the freight and the insurance. Singapore Customs starts from the sum of cost, insurance and freight, known as the CIF value, as the base for GST and any duty. If the seller already paid freight and insurance, do not add them a second time.
Next, check whether duty applies to your goods. Most goods carry no customs duty in Singapore. Duty applies only to four groups: liquor, tobacco, motor vehicles and petroleum products. For those, duty is charged either as a share of the customs value or as a fixed amount per unit. Check the official list of dutiable goods before you place a large order.
Convert any foreign money to Singapore dollars first. Keep the invoice, the freight bill and the insurance paper. You may need them to show how you reached the figures.
Sources: Singapore Customs, "Establishing Customs Value and Methods", https://customs.gov.sg/businesses/valuation-duties-taxes-fees/establishing-customs-value-for-imports; Singapore Customs, "List of Dutiable Goods", https://customs.gov.sg/businesses/valuation-duties-taxes-fees/duties-and-dutiable-goods/list-of-dutiable-goods.
Add GST at 9 percent
The Singapore GST rate went up to 9 percent on 1 January 2024. Goods imported in 2023 were charged at 8 percent. Goods imported on or after 1 January 2024 are charged at 9 percent. Make sure your old sums use the new rate.
Import GST is worked out on the CIF value plus any duty, commissions and other incidental charges. It is not worked out on the goods price alone. This is the step many new importers get wrong.
A GST-registered business can often claim import GST back as input tax. If you are registered, you may leave GST out of your landed cost. If you are not registered, GST is a real cost, so include it.
Sources: Inland Revenue Authority of Singapore (IRAS), "GST rate change", https://www.iras.gov.sg/taxes/goods-services-tax-(gst)/gst-rate-change/gst-rate-change-for-consumers1; IRAS, "Importing of goods", https://www.iras.gov.sg/taxes/goods-services-tax-(gst)/claiming-gst-(input-tax)/importing-of-goods.
A worked example and your handling fees
Say you buy 500 units at S$8 each. The goods cost S$4,000. Freight is S$300 and insurance is S$40. The CIF value is S$4,340. Assume your product carries no duty.
GST at 9 percent on S$4,340 is S$390.60. Now add handling fees: S$120 for customs clearance and port charges, and S$150 for delivery to your warehouse. These are example figures only. Use your own bills.
The total is S$4,340 plus S$390.60 plus S$270, which is S$5,000.60. Divide by 500 units. Your landed cost is about S$10.00 per unit, not S$8.00. If you can claim the GST back, it falls to about S$9.22.
That gap of S$2.00 is why this sum matters. A shop that priced at a 25 percent markup on S$8 would sell at S$10.00. If it cannot claim the GST back, it makes nothing.
Keep your own sheet with one row per shipment. List each cost in its own column. Update it whenever the freight rate, duty or exchange rate changes.
Sources
- Singapore Customs, "Establishing Customs Value and Methods": https://customs.gov.sg/businesses/valuation-duties-taxes-fees/establishing-customs-value-for-imports
- Singapore Customs, "List of Dutiable Goods": https://customs.gov.sg/businesses/valuation-duties-taxes-fees/duties-and-dutiable-goods/list-of-dutiable-goods
- International Chamber of Commerce, "Incoterms 2020": https://iccwbo.org/business-solutions/incoterms-rules/incoterms-2020/
- IRAS, "GST rate change": https://www.iras.gov.sg/taxes/goods-services-tax-(gst)/gst-rate-change/gst-rate-change-for-consumers1
- IRAS, "Importing of goods": https://www.iras.gov.sg/taxes/goods-services-tax-(gst)/claiming-gst-(input-tax)/importing-of-goods