What is landed cost?
It makes sense that duty and tax are what pop into most people’s heads when they hear the term “landed cost” because they are the most consistent elements of landed cost. While they make up a significant and consistent part of a landed cost, they only account for part of it. A landed cost calculation includes the sum of the product, duties, taxes, and fees from customs, brokers, or the shipping carrier -- depending on the country, duty and tax are charged not only on the product but on the shipping and other fees, as well. This means that standard duty and tax calculations based solely on products are missing a lot!
What’s the point of calculating clearance costs for your consumers?
Providing a calculation of the fees that your cross-border customer will have to pay to clear a package provides transparency and trust between you and your consumer. If your consumers are presented with a bill for clearance fees after they’ve already purchased their products, they may feel misled. To be a successful international ecommerce business, you need to either allow for prepayment of these fees or at least provide an estimate of what the consumer will have to pay. Otherwise, you may end up with the following:
- Abandoned packages
- Negative customer experience for your international consumers
- Loss of customers
Landed cost calculation vs. duty and tax calculation
What should this calculation look like? Many online retailers think that providing a duty and tax calculation at checkout is sufficient, but it isn’t. Simply providing a duty and tax estimate, or even allowing your cross-border consumers to prepay duty and tax isn’t enough. This can still result in surprise fees like the ones mentioned above; advancement fees and COD (collect on delivery) fees are other examples.
Here’s an example of how the elements of a landed cost may be distributed, taken directly from Zonos Quoter:
Let’s run through an example of using a duty and tax service vs. a landed cost solution like Zonos Landed Cost. For reference, below is an example of a landed cost breakdown (part of the same example from the above image):
Let’s imagine your ecommerce store uses a duty and tax calculator. You would have still not taken into account the additional fees (Currency conversion fee, United Kingdom disbursement fee, and United States duty & tax forwarding charge) which amount to $30.72. As a result, you’d have to either present your consumer with this additional amount or absorb it yourself; either way, this issue could have been avoided by calculating a true landed cost. This is also a good example of how the ship-from and ship-to countries can determine the fees within a landed cost.
In summary, here’s how a landed cost vs duty and tax solution compare:
| Zonos Landed Cost | Duty and tax solutions |
|---|---|
| Full landed cost calculation | Solely duty and tax calculation; only a small part of the total landed cost |
| All duty and tax calculated | Doesn’t account for the tax on the shipping and duty as required by certain countries |
| No additional surprise fees for your consumer | Additional bill presented to the consumer |
| Creates trust and transparency between you and your consumer (good customer experience) | Creates a poor customer experience and makes the customer feel misled |
Is calculating landed cost enough?
Now that we’ve established that a landed cost calculation is unquestionably better than a duty and tax calculation, let’s talk about how you can take a step further to ensure successful cross-border ecommerce. Allowing consumers to prepay the total landed cost instead of being billed by the carrier will allow for a better customer experience since they can pay one time and be done.
What if I charge the consumer incorrectly?
Overcharging or undercharging your international consumer based on an incorrect landed cost estimate isn’t uncommon. In fact, estimating accurately and still receiving a bill that does not reflect your correct estimation isn’t uncommon either. This is what makes Zonos’ landed cost solutions the best in the industry; we take on the risk for you.
Zonos recommends…
Zonos covers you for any inaccurate estimations with Landed Cost guarantee, our white-glove service. Landed cost guarantee is an ideal solution because we guarantee an accurate landed cost and you never have to worry about disputing fees (which is a real headache). We handle any disputes and you can continue to ship internationally worry-free. No other “landed cost” solution calculates a true landed cost and covers you for any landed cost discrepancies from customs.
Choose landed cost over duty and tax
Learn why duty and tax calculations alone are not enough for cross-border shipments, and why a full landed cost is the only reasonable solution.
When it comes to landed cost, most people think that duties and taxes are the only fees that an international order incurs. Duties and taxes only account for a fraction of the total landed cost; fees such as brokerage fees, DDP surcharges, wharfage fees, and more depending on the country are included in a total landed cost. Therefore, only taking into account duties and taxes when shipping cross-border is not an accurate reflection of what the package’s landed cost will be.
So when choosing a solution for calculating the landed cost for your cross-border shipments, make sure it’s a full landed cost.