Definition - What does Landed Cost mean?
Landed cost is the total cost of a commodity or a product when it lands at the ports of the country importing the commodity/product from another country. Landed cost is one of the important terms which should be made clear between two parties entering into a trade contract for any of the commodities such as crude oil, natural gas, coal, minerals, etc., or any other goods that are imported from one country to another.
Petropedia explains Landed Cost
A landed cost is the total cost of the product when it lands at the buyers gates (or at the nearest port of import). The landed cost includes the following costs:
- Manufacturing cost of the product at Ex works or products original price quoted by the supplier.
- All transportation costs. This includes cost of transportation from factory gates till the loading port where product will be loaded into the vessel.
- Cost insurance and Ocean Freight (CIF)
- Currency Conversion
- Handling charges and payments.
Once these costs are cleared by the buyer, then only the product is allowed to move further till the factory gates of the buyer.
There are various set of INCO terms that are useful to know when any trading has to happen between cross countries. Some of the common INCO terms are:
- Free on Board (FOB)
- Cost and Freight (CFR)
- Cost Insurance & Freight (CIF)
- Delivery Duty Paid (DDP)
The mark up on the cost of the product or any commodity is done by the buyer once the goods has been transferred under his/her custody after clearing the landed cost.