China Sourcing Costs: What Goes into the Landed Price

About this guide. This is general information based on our work as a sourcing agent in Guangzhou, not legal, tax or customs advice. Requirements depend on the product and destination and change over time; confirm them with the relevant authority, your customs broker or a qualified adviser before ordering.

The factory quote is the most visible number and rarely the most important one. A landed-cost calculation, done before you order, prevents the most common surprise in China sourcing: a product that looked profitable at the unit price and is not once it reaches your warehouse.

1. The unit price and what it depends on

Factory pricing moves with quantity, specification and payment terms. Ask for price breaks at several quantities and for the assumptions behind them: material grade, finish, packaging and any accessories. Understand which Incoterm the price is quoted on. EXW excludes everything after the factory gate; FOB includes local transport and export clearance to the ship; CIF or DDP include progressively more but make the supplier’s freight margin invisible.

2. One-off costs

• Samples — usually paid, plus courier costs to you.
• Tooling and moulds — for custom products. Agree in writing who owns them.
• Artwork and packaging development — dielines, printing plates, print proofs.
• Testing and certification — laboratory fees for the reports your market may require. These are paid to the laboratory, not the factory.

3. Quality and coordination

• Inspection — typically charged per inspector-day plus travel.
• Sourcing agent or service fees — a commission on order value, a flat project fee or a retainer, depending on the arrangement. Ask any agent to state the model in writing before work starts.

4. Logistics

• Origin charges — factory to port, export customs, terminal handling.
• Freight — sea (full container or less-than-container), air or express. Rates change with season and route; get a quote for your actual volume and timing.
• Insurance — cargo insurance for the shipment.
• Destination charges — port or terminal handling, customs brokerage, delivery to your address.

5. Duty and tax at destination

Import duty depends on the product’s tariff classification and origin. Import VAT or sales tax is typically charged on the customs value plus duty and freight. Rates and reliefs vary by country and change over time, so confirm the classification and rates with a customs broker or the relevant authority. Our guides to importing to the UK and importing to the UAE and Saudi Arabia cover the main points for those markets.

Costs also vary by category: tooling matters most for auto parts and custom electronics, while packaging and freight dominate for furniture.

6. The costs first-time buyers forget

• Currency movement between quote and payment.
• Bank transfer fees on the deposit and balance.
• Warehousing at destination if goods arrive before you are ready.
• Rework, sorting or reshipment when a batch fails inspection.
• Minimum order quantities that push you into holding more stock than planned.
• Time: the cost of a delayed launch is often larger than any line above.

Building a landed-cost sheet

Put every item above on one sheet, per unit, at the quantity you expect to order. Add a contingency for the unknowns. If the resulting landed cost does not leave the margin you need, the answer is usually to change the specification, the quantity or the supplier before ordering, not to hope the surprises stay small.

How Flawless Effect helps

We give buyers a clear breakdown of unit cost, packaging, tooling and freight, negotiate directly with the factory in Chinese, and agree commercial terms in writing before work starts. See price negotiation and logistics and delivery.

Frequently asked questions

Official sources and further reading

• ICC Incoterms 2020 — what each trade term includes
• UK Trade Tariff — commodity codes and duty rates
• HMRC: check if you can use postponed VAT accounting — import VAT treatment