Landed Cost for Clothing: The Short Answer
If you are an importer comparing quotes from overseas factories, the number that matters is not the price per piece on the quotation. It is the landed cost for clothing: everything you pay to get the garment from the factory into your own warehouse. That means the product price (often quoted FOB), plus freight, insurance, customs duty, import VAT, clearance and handling charges, and delivery inside the UK. Buyers who compare FOB quotes alone usually find the real cost per piece is noticeably higher than they planned, which squeezes margin before a single unit is sold.
The sections below set out each component, show how customs value and import VAT are worked out, and walk through an illustrative calculation using assumed figures. Rates and rules change, so confirm duty and VAT with the official sources before you make a pricing decision.
What Landed Cost for Clothing Includes
Landed cost is the total cost of getting goods to your door. For a garment it is built from layers. The first layer is the product itself. The second is moving it: freight and insurance. The third is government charges: duty and import VAT. The fourth is the handling that makes the first three possible: customs clearance, port or airport charges and the final delivery.
Landed cost components and what each covers
| Component | What it covers | Who sets or checks it |
|---|---|---|
| FOB product cost | The garment price up to loading on the vessel | Your factory quote |
| Freight | Carriage by sea or air to the UK | Freight forwarder quote |
| Insurance | Cover for loss or damage in transit | Your insurer or forwarder |
| Customs duty | Duty on the customs value, depending on commodity code and origin | UK Trade Tariff and your customs agent |
| Import VAT | VAT charged at import on the VAT value | GOV.UK and HMRC guidance |
| Clearance and handling | Customs entry, port or terminal fees, storage and agent charges | Customs agent and port quotes |
| Inland delivery | Transport from the port to your warehouse | Haulier quote |
Components are listed in the order the cost builds up. Always get written quotes for each.
How Customs Value and Import VAT Are Calculated
Customs value is the figure that duty and VAT calculations start from. It must be used even if no duty is payable, and any amounts in a foreign currency must be converted into pounds sterling. Duty is charged on the customs value at the rate for your goods, so check the current rate for your commodity code on the UK Trade Tariff and ask your customs agent to confirm the code.
Import VAT is worked out on a larger figure than the customs value. The VAT value is the customs value, plus incidental costs up to the first UK destination, such as commission, packing, transport and insurance, plus other incidental expenses such as customs clearance charges, handling, storage and entry fees, plus customs duty and any excise or other import charges, but not the VAT itself. If the next UK destination is known when the goods arrive, onward transport to it is included as well. Royalties, licence fees and prompt-payment discounts can be left out under the published rules. The full method is on GOV.UK in the GOV.UK guidance on working out the VAT value of imported goods.
What goes into the import VAT value
| Included | Not included |
|---|---|
| Customs value of the goods | The VAT itself |
| Commission, packing, transport and insurance up to the first UK destination | Royalties and licence fees that the rules allow you to leave out |
| Customs clearance charges, handling, storage and entry fees | Prompt-payment discounts that the rules allow you to leave out |
| Customs duty and any excise or other import charges | |
| Onward transport if the next UK destination is known |
Paraphrased from the GOV.UK guidance on working out the VAT value of imported goods. Check the live page, as rules can change.
VAT registered businesses can often account for import VAT through their VAT return rather than paying it at the border. Ask your customs agent or accountant whether this applies to you.
A Worked Example of Landed Cost for Clothing
The calculation below uses assumed figures chosen purely for arithmetic. They are not prices, duty rates or VAT rates for any real product, and you must replace them with your own quotes. The assumptions are: 600 hoodies; an FOB price of 9.00 pounds each; sea freight of 300 pounds and insurance of 30 pounds for the whole shipment; duty of 12 per cent on the customs value; VAT of 20 per cent on the VAT value; clearance and port handling of 250 pounds; and delivery to the importer warehouse, which is the first UK destination, of 180 pounds. For this example the customs value is taken to be the FOB price plus freight and insurance to the UK port.
Illustrative landed cost: 600 hoodies
All figures assumed
| Line | Working | Amount (pounds) | Per piece |
|---|---|---|---|
| FOB product cost | 600 x 9.00 | 5,400.00 | 9.00 |
| Freight and insurance | 300 + 30 | 330.00 | 0.55 |
| Customs value | 5,400 + 330 | 5,730.00 | 9.55 |
| Duty (assumed 12 per cent) | 5,730 x 0.12 | 687.60 | 1.15 |
| Clearance, handling and delivery | 250 + 180 | 430.00 | 0.72 |
| VAT value | 5,730 + 687.60 + 430 | 6,847.60 | 11.41 |
| Import VAT (assumed 20 per cent) | 6,847.60 x 0.20 | 1,369.52 | 2.28 |
| Total cash outlay | 6,847.60 + 1,369.52 | 8,217.12 | 13.70 |
Illustrative arithmetic only. Rates are assumptions, per piece figures are rounded to the penny, and import VAT may be recoverable for a VAT registered business; confirm with your accountant.
Without VAT, the landed cost is 6,847.60 pounds, or about 11.41 pounds a piece, against an FOB price of 9.00. That is a gap of roughly 2.41 pounds a piece before VAT. If you priced your range from the FOB quote alone, that gap comes straight out of margin.
Where the Money Goes: An Illustrative Split
The chart below turns the same example into proportions of the total cash outlay of 8,217.12 pounds, including import VAT. It shows why the product price is the biggest slice but far from the whole story, and why VAT matters so much for cash flow even where it can later be recovered.
Illustrative landed cost split for an imported garment
- Product cost (FOB)66%
- Freight and insurance4%
- Duty8%
- Import VAT (cash flow effect)17%
- Clearance and delivery5%
Illustrative only. Based on the assumed figures in the worked example (600 hoodies, 9.00 pounds FOB, assumed 12 per cent duty and 20 per cent VAT), rounded to whole numbers that sum to 100. Real shipments differ.
In this example the VAT slice is a timing issue for many businesses rather than a permanent cost, but it still has to be funded or accounted for correctly. Freight is a small slice here because the example is a full sea shipment; air freight or very small orders change the picture sharply, which our guide to sea freight vs air freight for clothing explains.
How the Cost Builds Up Per Piece
Another way to see landed cost for clothing is as a running total per garment. The chart below adds each layer in turn, using the same assumed figures, so you can see how a 9.00 pound FOB price becomes 13.70 pounds once all costs and VAT are included.
Running cost per piece, illustrative (pounds)
Pounds per piece
Illustrative running totals from the worked example, rounded to the penny. Assumed figures, not real quotes or rates.
The step-by-step logic is useful when a supplier offers a slightly lower FOB price. A saving of a few pence at the factory can easily be wiped out by a different freight route, a higher-duty commodity code or an extra handling charge.
Incoterms: FOB, CIF and DDP and Who Pays What
The Incoterms rules are published by the International Chamber of Commerce, and the ICC Incoterms rules pages explain the current set. They decide which costs sit in the seller price and which you must add yourself. Under FOB the seller covers the cost to loading on the vessel. Under CIF the price also includes carriage and insurance to the named port. Under DDP the seller delivers the goods with import formalities done, so more of the landed cost sits inside the quote.
Who pays what under FOB and DDP
| Cost component | FOB | DDP |
|---|---|---|
| Product and loading at origin | In the seller price | In the seller price |
| Main freight | Buyer arranges and pays | Seller arranges, built into the price |
| Insurance | Buyer arranges and pays | Seller arranges, confirm what cover applies |
| Customs duty | Buyer pays | Seller pays, built into the price |
| Import VAT | Buyer pays or accounts for it | Confirm who is importer and how VAT is handled |
| Clearance and handling | Buyer pays | Seller pays, built into the price |
| Inland delivery | Buyer pays | Seller pays, built into the price |
A broad summary. The contract wording matters; confirm responsibilities in writing with your supplier and forwarder.
A DDP quote looks higher than an FOB quote but contains more, so compare like for like. Our guide to Incoterms for jeans orders covers EXW, FOB, CIF and DDP in more depth, and the same logic applies to any garment.
How to Build a Landed Cost Sheet
A landed cost sheet is a simple spreadsheet that you rebuild for every style and every shipment. Its job is to turn each supplier quote into a comparable landed cost for clothing per piece before you commit to an order or set a selling price.
Building a landed cost sheet
- 1Collect the quotesGet written FOB, freight, insurance, clearance and delivery figures.
- 2Confirm the code and originCheck the commodity code and origin rules with your customs agent.
- 3Work out customs valueConvert to pounds sterling and build the customs value.
- 4Add duty and VATApply the real duty rate and the VAT value method.
- 5Divide by piecesTurn the total into a cost per piece and add a safety margin.
Rebuild the sheet whenever rates, exchange rates or freight prices change.
Many importers underquote because they forget one cost or use an old rate. Build in a contingency for currency moves and freight changes, and compare the sheet with real invoices after the first shipment so you can correct it. For duty, rules of origin matter: goods made in Bangladesh may qualify for preferential treatment if the conditions are met, which our guide to UK DCTS rules of origin for Bangladesh garments explains.
Common Mistakes That Cause Underquoting
Most mistakes in landed cost for clothing come from the same small set of habits. Spotting them early protects your margin.
- Comparing FOB quotes from suppliers without adding freight, duty and handling.
- Using the product price instead of the customs value as the starting point for duty.
- Forgetting that import VAT is calculated on a figure that already includes duty and handling.
- Using a duty rate from memory instead of checking the commodity code.
- Ignoring currency conversion between the quote currency and pounds sterling.
- Leaving out inland delivery, storage or agent fees.
If your garment budget starts from a factory price, our guide to how much it costs to make a t shirt shows how the product cost itself builds up before landed cost begins.
A Checklist to Use Before You Ship
Run through the list below before you confirm a booking. Anything you cannot answer is a gap worth closing while you can still change the order.
Before you ship
- I have the commodity code confirmed and the duty checked on the UK Trade Tariff.
- I know whether origin rules could reduce the duty and have the paperwork to show it.
- I have written quotes for freight, insurance, clearance and delivery.
- I have worked out the customs value and the VAT value in pounds sterling.
- I have asked my accountant or agent how import VAT will be handled in my business.
- I have agreed the Incoterm in writing and know who pays each cost.
- I have built a landed cost per piece with a contingency and compared it with my selling price.
Keep a copy of every quote and invoice with the sheet.
Dates matter too, because late bookings often cost more. Plan shipping into your time and action calendar so freight, clearance and delivery are booked before production finishes. For the full import route see our guide to importing clothing from Bangladesh to the UK, and the official UK Trade Tariff remains the place to confirm duty.
How Ruhrose Approaches Landed Cost
Ruhrose develops hoodies, jersey, denim and woven casualwear for UK buyers, with production in Bangladesh. We aim to make our quotes clear about what is and is not included, so you can add your own freight, duty and VAT and see the true landed cost for clothing per piece. We cannot give you duty or VAT figures, because they depend on your commodity code, origin documents and business, so we point you to the official sources and to your customs agent. Our approach is described across Ruhrose's clothing manufacturing services.
Before you compare your next two quotes, ask yourself one question: do both of them end at the same point in the journey, or is one still missing half the cost?