A supplier quotes you a price per tonne. It looks workable. You place the order, and by the time the goods are on your floor the real cost is far higher than the number you based the decision on. This is the most common and most expensive mistake in importing, and it is entirely avoidable.
The components
Landed cost is the total of everything required to get goods from the supplier's gate to your warehouse. Depending on the Incoterm you agree, some of these sit with the supplier and some with you, but somebody pays all of them and it is ultimately reflected in your cost per unit.
| Component | What it is |
|---|---|
| Goods value | The supplier's price at the agreed Incoterm |
| International freight | Sea or road movement from origin to Pakistan |
| Insurance | Marine or inland cargo cover, if arranged |
| Customs duty | Assessed on the customs value, set by HS classification |
| Additional customs duty | Levied on top of the standard rate |
| Sales tax | Applied on the duty-paid value |
| Advance income tax | Collected at import, adjustable against your liability |
| Port and terminal charges | Handling, storage and delivery order fees |
| Clearing and documentation | Agent's fee and filing costs |
| Inland transport | Port or border to your warehouse |
Why the duty number is not one number
Duty is calculated on the customs value, not simply on what you paid. If customs assess the value higher than your invoice, every percentage-based charge above rises with it. This is why HS classification and valuation matter so much: they do not just set a rate, they set the base that several other charges are calculated from.
Two products that look similar can sit in different tariff headings with materially different rates. Getting that classification right, and being able to justify it, is worth more than most people realise.
The Incoterm decides who carries what
EXW means you take on everything from the supplier's door. DDP means the seller delivers duty paid and the risk sits with them until you receive the goods. Most trade sits between the two. The Incoterm is not paperwork formality, it is the line that decides who pays when something goes wrong in transit.
- EXW - you arrange and pay for everything from the factory gate onward
- FOB - the seller delivers to the vessel; freight and everything after is yours
- CFR and CIF - the seller covers freight, and under CIF insurance too, up to the destination port
- DAP - the seller delivers to a named place, but import duty and clearance remain yours
- DDP - the seller delivers cleared and duty paid
A cheap EXW price and an expensive DDP price can be the same deal. Compare like for like, or you are not comparing anything at all.
Need this applied to your shipment?
General guidance only gets you so far. Send us the product, the quantity and the destination and we will tell you exactly how it works for your case, including the numbers.