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Landed Cost Calculation for Importers: Formula, Allocation Methods and ERP Support
Last updated: October 7, 2026 · Independent guide · We do not sell rankings or coverage.
Landed cost calculation adds every cost of getting imported goods into your warehouse (supplier price, international freight, insurance, customs duty, federal user fees, brokerage and inland delivery) and spreads those costs across the items received. Landed cost per unit equals the unit purchase price plus that unit’s allocated share of each charge. The difficult parts are choosing an allocation basis, calculating US duty on the correct value, and booking bills that arrive after the goods are sold.
The landed cost formula and journal entries
Total landed cost = supplier cost + freight + insurance + duties and fees + brokerage + destination charges. For each SKU line, landed cost per unit = (line purchase cost + the line’s allocated share of each charge) ÷ quantity received. For a US importer the charges include duty, the merchandise processing fee (MPF), the harbor maintenance fee (HMF) for ocean cargo and broker fees.
The entries below use the accrual method: you record estimated charges at receipt and clear the accrual as actual bills post.
| Account | Debit | Credit | Note |
|---|---|---|---|
| 1. At receipt | |||
| Inventory | Supplier cost + estimated charges | Full landed cost per SKU | |
| Accounts payable (supplier) | Supplier cost | ||
| Landed cost accrual | Estimated charges | Current liability | |
| 2. When each freight, broker or duty bill posts | |||
| Landed cost accrual | Amount accrued | ||
| Inventory | Difference, share still on hand | Credit if the bill is lower | |
| Cost of goods sold | Difference, share already sold | Credit if the bill is lower | |
| Accounts payable (forwarder, broker) or cash | Actual bill | ||
| 3. At sale | |||
| Cost of goods sold | Units sold × landed cost | ||
| Inventory | Units sold × landed cost | ||
Under standard costing you post differences to variance instead; see our guide to standard cost vs actual cost.
Worked example: one container, two SKUs
Illustration only. Figures are constructed and do not come from a real company or tariff line.
A distributor imports one ocean container bought FOB, with a supplier invoice of $60,000. SKU A is 2,000 units at $18.00 ($36,000), 4,000 kg and 40 cubic meters (CBM), with an assumed 5% duty rate. SKU B is 1,000 units at $24.00 ($24,000), 6,000 kg and 20 CBM, assumed duty-free.
Step 1: Find the dutiable value
Duty is assessed on transaction value, which excludes international freight and insurance, so the $60,000 FOB invoice is the dutiable value. On a CIF or DDP price you would first deduct the freight and insurance included.
Step 2: Calculate duty and fees
Duty on SKU A is 5% × $36,000 = $1,800. The MPF is 0.3464% × $60,000 = $207.84 (between the $34.58 minimum and the $670.86 maximum). The HMF is 0.125% × $60,000 = $75.00 for ocean cargo.
Step 3: Choose an allocation basis for each charge
Split each charge on the basis that drives it.
| Basis | Splits the charge by | Best fit | Where it goes wrong |
|---|---|---|---|
| Value | Each line’s purchase cost | Insurance, MPF, HMF | Loads freight onto expensive, compact items |
| Weight | Each line’s total weight | Air freight, drayage, heavy goods | Needs accurate item weights |
| Volume | Cubic meters or feet | Ocean freight | Needs carton dimensions |
| Quantity | Equal amount per unit | Brokerage, labeling | Distorts when items differ in size or price |
Duty is different: rates vary by tariff line, so assign it to the lines that incurred it using the entry summary.
Step 4: Allocate and calculate unit cost
| Charge (basis) | Total | SKU A | SKU B |
|---|---|---|---|
| Supplier cost | $60,000.00 | $36,000.00 | $24,000.00 |
| Ocean freight (volume) | $4,800.00 | $3,200.00 | $1,600.00 |
| Insurance (value) | $300.00 | $180.00 | $120.00 |
| Duty (entry line) | $1,800.00 | $1,800.00 | $0.00 |
| MPF (value) | $207.84 | $124.70 | $83.14 |
| HMF (value) | $75.00 | $45.00 | $30.00 |
| Brokerage (quantity) | $250.00 | $166.67 | $83.33 |
| Drayage (weight) | $900.00 | $360.00 | $540.00 |
| Total landed cost | $68,332.84 | $41,876.37 | $26,456.47 |
| Per unit | $20.94 | $26.46 |
Allocating all $8,332.84 of charges by value (60/40) would give $20.50 and $27.33, overstating SKU B by $0.87 a unit because it absorbs part of SKU A’s duty.
Step 5: Record the receipt
Debit inventory $68,332.84, credit accounts payable to the supplier $60,000.00, and credit the landed cost accrual $8,332.84. As bills post at the estimated amounts, debit the accrual and credit accounts payable or cash.
Step 6: True up a late freight bill
The freight bill arrives five weeks later at $5,400 instead of the $4,800 accrued. By then 1,000 units of SKU A have been sold at a cost of $20,938.19. By volume, $400 of the $600 difference belongs to SKU A, half of it on sold units, and $200 to SKU B.
| Account | Debit | Credit | Note |
|---|---|---|---|
| Landed cost accrual | $4,800.00 | ||
| Inventory | $400.00 | $200 SKU A on hand, $200 SKU B | |
| Cost of goods sold | $200.00 | SKU A units already sold | |
| Accounts payable (forwarder) | $5,400.00 |
The remaining SKU A units now carry $21.14 each, and SKU B carries $26.66.
The rules behind the calculation
Accounting and tax
ASC 330 defines inventory cost as “the sum of the applicable expenditures and charges directly or indirectly incurred in bringing an article to its existing condition and location.” Abnormal costs, such as duplicative handling, are expensed instead (PwC Inventory guide, no date shown). For tax, 26 CFR 1.471-3(b) adds “transportation or other necessary charges incurred in acquiring possession of the goods” to the net invoice price (eCFR, up to date as of October 5, 2026).
The same rules cover freight-in on domestic purchases, where your shipping terms decide whether the freight is your cost at all.
Customs value
Transaction value excludes “any costs, charges, or expenses incurred for transportation, insurance, and related services incident to the international shipment” to the US (19 U.S.C. 1401a(b)(4)(A), Cornell LII, no date shown). CBP adds packing, selling commissions, assists and royalties, and excludes duties themselves (19 CFR 152.103, eCFR, up to date as of October 5, 2026).
MPF and HMF
For FY2027, starting October 1, 2026, the MPF on formal entries stays at 0.3464% ad valorem, with the minimum rising to $34.58 and the maximum to $670.86 (Federal Register, CBP Dec. 26-14, July 31, 2026). The HMF is 0.125% of the value of commercial cargo at listed US ports, so it applies to ocean shipments and not to air freight (19 CFR 24.24, eCFR, up to date as of October 5, 2026).
When duty becomes final
Duty deposited at entry stays provisional until liquidation, which, unless extended or suspended, occurs within one year of entry (19 CFR 159.11, eCFR, up to date as of October 5, 2026). Later duty bills or refunds need the same inventory and cost of goods sold split.
Common mistakes
- Applying the duty rate to the all-in cost. Duty is calculated on transaction value, before freight and insurance.
- Applying 0.3464% to every line. The MPF is capped per entry, so use the entry summary figure.
- Spreading duty by value. Duty-free items pick up duty they never paid.
- Adding late bills only to inventory. The share for sold units belongs in cost of goods sold.
- Including outbound freight. Delivery to customers is not a cost of bringing goods to your warehouse.
How to report landed cost
On the balance sheet, landed cost sits in inventory until the goods are sold, and unbilled estimates sit in the landed cost accrual as a current liability. On the income statement, landed cost reaches cost of goods sold as units sell, along with true-ups on units already sold. Reconcile the accrual monthly and investigate old balances.
How ERP and accounting systems automate it
Oracle NetSuite. Landed cost is entered on an item receipt or vendor bill using one allocation method per transaction (weight, quantity or value), for items marked Track Landed Cost (Oracle NetSuite Help, no date shown). Mixed containers that need freight by weight and insurance by value on one receipt are therefore awkward.
Microsoft Dynamics 365 Business Central. Landed costs are item charges, assigned equally or by amount, weight or volume. A late freight invoice is assigned to the posted receipt with Get Receipt Lines (Microsoft Learn, July 23, 2026).
Acumatica. Landed cost codes set the allocation method (quantity, cost, weight or volume) and accounts, and costs go on a separate document linked to purchase receipts. If items were already sold, the share for the issued quantity posts to the landed cost variance account instead of inventory (MYOB Acumatica user guide, no date shown; MYOB resells Acumatica).
Sage Intacct. You post estimates and then actuals, by count, value, volume or weight. When actuals differ and items have been sold, Intacct updates cost of goods sold in open periods and offers adjustments for closed ones. It applies only to average, FIFO and LIFO items (Sage Intacct Help, October 1, 2026). For other inventory features, see our guide to key features of distribution software.
How we researched this
We reviewed the top-ranking pages for this term from Cleverence (which sells inventory software), FedEx, Red Stag Fulfillment and DCL Logistics (which sell shipping or fulfillment services). None explains US dutiable value, the FY2027 fees or the entries for late invoices. We relied on the eCFR, US Code, Federal Register, PwC and vendor documentation. No vendor reviewed or paid for this article.
Related guides
- Inventory Costing Methods: FIFO, Average, Standard, Specific
- Three-Way Match in AP: How It Works and Software Options
- Goods Received Not Invoiced (GRNI): Accrual and ERP Setup
Frequently asked questions
What is the journal entry for landed cost?
At receipt, debit inventory for the supplier cost plus estimated charges, credit accounts payable for the supplier cost, and credit a landed cost accrual for the estimated charges. When the actual bills arrive, debit the accrual, credit accounts payable, and post any difference to inventory or cost of goods sold.
Is freight included in customs value in the US?
No. Under 19 U.S.C. 1401a(b)(4)(A), transaction value excludes transportation, insurance and related services for the international shipment.
What happens if the freight invoice comes after I already sold the goods?
The share for units still on hand goes to inventory and the share for units sold goes to cost of goods sold. Confirm how your system handles this split before go-live.
How is the merchandise processing fee calculated for FY2027?
From October 1, 2026, the MPF on formal entries is 0.3464% of value, with a $34.58 minimum and a $670.86 maximum per entry. Ocean shipments also pay the 0.125% HMF.
Sources
- Federal Register: Customs User Fees To Be Adjusted for Inflation in Fiscal Year 2027 (CBP Dec. 26-14), July 31, 2026
- eCFR: 19 CFR 24.24, Harbor maintenance fee, up to date as of October 5, 2026
- eCFR: 19 CFR 152.103, Transaction value, up to date as of October 5, 2026
- eCFR: 19 CFR 159.11, Entries liquidated by operation of law, up to date as of October 5, 2026
- eCFR: 26 CFR 1.471-3, Inventories at cost, up to date as of October 5, 2026
- 19 U.S.C. 1401a, Value (Cornell Legal Information Institute), no date shown
- PwC Viewpoint: Inventory guide, 1.3 Inventory costing, no date shown
- Oracle NetSuite Help: Entering Landed Cost on a Transaction, no date shown
- Microsoft Learn: Use item charges to account for extra trade costs (Business Central), July 23, 2026
- MYOB Acumatica user guide: Configuration of Landed Cost Codes, no date shown
- MYOB Acumatica user guide: Adding Landed Costs to Items’ Costs, no date shown
- Sage Intacct Help: Landed costs overview, October 1, 2026
Sherman Hsieh
Independent analysis of enterprise software — ERP, CRM and more
